紐蒙特黃金公司 (NEM) 2008 Q1 法說會逐字稿

Welcome to the Newmont Mining Corporation's first quarter earnings conference call. At this time all participants are in a listen only mode. (OPERATOR INSTRUCTIONS) Today's conference is being recorded. If you have any objections you may disconnect at this time.

Now I will turn the meeting over to Mr. Richard O'Brien, President and Chief Executive Officer. Sir, you may begin.

Thank you, operator. Good morning everybody. Thank you for joining us in our first quarter 2008 earnings conference call. With me today on the call are several members of Newmont's management team who will be available for questions at the end of the presentation. Before we get started, I need to remind you that we will be discussing forward looking information involving a number of risks, certain of which are unique to our industry that are described in our SEC filings.

On slide 3 you can see the third quarter highlights. In July of 2007, a new management team took charge at Newmont. We wasted no time on demonstrating our commitment to improving our business results and focus by making several key decisions. The results of these decisions are evident this quarter in our financial, operational, and project execution results. Execution on our turnaround plans is leading to the intended results. We still have much work to do. But we're very pleased with these results and believe they suggest that the efforts of our management and dedicated employees are yielding sustainable improvements in our business.

In July of 2007, we eliminated our gold hedges. In the first quarter of this year, we realized a record gold price of $933 per ounce. The buyout of our hedge book positioned Newmont to take full advantage of the current gold bull market. Had we not taken that action, we would have had to deliver in 2008 approximately 1 million ounces at $384 per ounce. This move has clearly provided value for our shareholders. The higher effective gold price in the quarter combined with equity gold production of almost $1.3 million ounces led to record quarterly revenues of $1.94 billion.

Last July, we also committed to an ongoing focus on reducing operating costs and increasing our global efficiency and effectiveness. In the first quarter of this year, our costs applicable to sales were $396 per ounce, down 2% from the first quarter of 2007 and well within our plans for the quarter. Our results for the quarter are in stark contrast to the industry trends over the last two years, as reflected in the most recent GFMS gold survey, which shows 2007 total cash costs up almost 25% from 2006. We're committed to continuing to contain our cost profile at all levels of the company.

In July of last year, we we suggested to share holders that we intended to smooth out our production profile over the year, rather than relying on our historical fourth quarter production push. In the first quarter of this year, our production is about one quarter of our production estimate for the full year. While we're not suggesting that our production will occur straight line over the year, we do anticipate less reliance on that big production push in the fourth quarter as has historically been the case at Newmont. Quarter to quarter production shifts will still result from the timing of Nevada's annual mill maintenance in the second quarter of the year, the seasonal impacts of weather particularly at Batu Hijau and Yanacocha, and of course the usual fluctuations driven by stripping a grate. At the margin line for the quarter, the benefit of our cost containment efforts and higher commodity prices generated a gold operating margin of $537 per ounce, up significantly from the first quarter of 2007.

Our efforts to arrest the operating costs inflation combined with favorable gold prices have dropped right to the bottom line. True gold leverage, As we realize an adjusted net income of $386 million or $0.85 per share, substantially outperforming the consensus of $0.54 per share and an increase of 865% from the year-ago quarter. As the final line on this slide shows the true bottom line, we delivered almost $600 million of cash flow from continuing operations for the quarter. As a result of higher effective gold prices, production in line with our forecast and an improved operating costs profile.

Two related strategic decisions in 2007, while not leading to immediate financial results, would show up in the first quarter of this year on this slide do continue to provide us with the necessary gold focus and an improved project pipeline. As previously reported, we monetized our royalty portfolio, raising about $1.3 billion and almost simultaneously acquired Miramar in the end of the year. We completed the minority interest acquisition of Miramar in March of this year, giving us control of the world class Hope Bay deposits in the AAA rated company of Canada.

Moving to the next slide, this slide graphically demonstrates some of the points I just made. You can see in the top left average realized price up almost 44%. Cost applicable to sales down almost 2%, resulting in a operating margin increase of almost 119%. As a wrap on this slide, I would note that we believe that Newmont offers the highest leverage to operating margin per share of any gold company. Utilizing a mid-point of our production guidance and CAS for the year, $100 change in the gold price increases our pretax margin by approximately $1.15 per share, again we believe more than any other gold company.

Moving to the next slide, you can see the continual improvements in the third and fourth quarters of last year as well as this year as a result of a renewed focus across our operating businesses, with gold and copper production generally exceeding market estimates and an improving cost applicable to sales.

The decisions we made in our improved operating results in the last half of 2007 have clearly provided momentum carrying us into 2008. And our operational and project execution efforts are beginning to pay real tangible awards. This is clearly evidenced by our strong first quarter operating results, and as I will come to in a minute our successful project execution efforts in what is probably the most challenging project environment ever. With that, I will turn it over to Russell Ball, our CFO, for comments on the next few slides.

Thanks, Richard. Good morning all. For those who haven't had a chance to take a look, we did file our 10-Q last night. And there is a lot of detailed information in there. I will try to focus on the highlights on the equity sales for the quarter, with a brief look at the full costs for the year and CAS for the quarter as well. We will be using the same format we started in Q3 where we will compare in green on slide 6 the actual results with what was in our budget in for the quarter in gold and the blue being our guidance for the year.

Starting in Nevada you will see equity sales slightly below budget, but there was largely a timing issue with a significant inventory build that put production right in line for the quarter. I would like to comment on Phoenix, briefly. For the quarter, Phoenix produced gold at $401 an ounce, significantly below our prior year numbers. And in fact, our budget which was roughly $545 an ounce for the quarter. So we continue to see solid progress. Clearly the work is not done. But we have had two months in February and March where we exceeded 1 million tons milled. We are still dealing with recovery issues but we're feeling more and more confident about the direction in which Phoenix is headed.

At Yanacocha, we were slightly ahead of budget partly due to the inventory drawdown. We sat on some inventory fourth quarter last year as we spoke to you on the year-end call about. We didn't place the ounces in the fourth quarter and early into the first quarter, so we have seen a shift in production at Yanacocha to the second half of the year which does increase our risks slightly. On the positive side, as Dick will speak to later, the gold mill was actually turning in the first quarter and that ramp up is going well. So we will see production from that. And we expect commercial production in Q2.

In Australia you can see we were significantly ahead of budget, driven by some excellent grades and operating results at the Jundee operation in Australia. Batu Hijau again slightly ahead of budget largely due to inventory drawdowns from year end. Dick will speak to you in a little bit on the issues we face because as we look at our guidance for the year, Batu Hijau really represents the biggest risk we see today and we will provide more color on that later on in the slides.

Ghana you will see was about 30,000 ounces below budget. A couple of factors. There was some unplanned mill maintenance and we continue to see power interruptions in Ghana. The power issues are clearly not behind us, and we did have some unscheduled down time as a result of that. We expect to be caught up all but 15,000 to 20,000 ounces of that shortfall by year end as the management team has put in a mitigation plan.

Turning to slide 7. Costs applicable to sales. You will see for quarter we were at $396. We are maintaining our guidance for the year at $425 to $450. I will speak to that in a second. But looking at Nevada, you will see costs largely in line, again, a solid quarter from Phoenix versus our expectations. And as Dick will speak to in a little bit we should see some benefit from the power plant which will be hopefully in commercial production by the end of the quarter. Yanacocha continues to deliver in line with the numbers that they have committed. Australia again driven by Jundee with a significantly lower CAS versus what we had in the budget driven largely by higher grades and production. We do however continue to struggle at KCGM. If you look in the details you will see we were in excess of $750 an ounce in the quarter. At Batu Hijau, higher costs a function of some stripping and lower production, again, sales a little higher than what we had expected, but that was largely due to timing of inventory. And as I mentioned earlier, this really represents the biggest risk to us for the year. Ghana costs were down largely due to lower stripping and vacancies that haven't been filled.

If you look at our forecast for the year of $425 to $450, it is important to realize that when we put out initial guidance we assumed a $700 gold price in this roughly $900 gold price environment. We do see cost pressure resulting from increased royalties, workers' participation and the like. That will be about $10 to $15 higher. We're also in $115 oil environment versus $80 in our original budget prepared last October, and the forecast assumption of $90 for the first quarter forecast. So, we do have some exposure there. On the Aussie dollars, we are starting to hedge our exposure to the Aussie dollar, but we had budgeted at AUD$0.875 and we're in a roughly AUD$0.95. In our earnings release, we provided sensitivity to that. You can pick your oil price in Aussie dollar and get an idea of the impact on our CAS.

On the positive side, the higher commodity prices have resulted in us seeing better by product credits, in particular copper at Phoenix and Nevada and silver largely from our Midas operation in Nevada and in Yanacocha. So as Dick said we have a keen focus on costs. But, clearly the inflationary pressures are there, but we have plans in place to mitigate that and we still feel comfortable with our original guidance of $425 to $450 an ounce.

Thanks, Russell. Moving to the next slide, our major projects update. As you all know we're seeing across the industry continued cost escalation and schedule extensions on major projects. Guy Lansdown -- our Senior Vice President of Project Development and Technical Services -- and his team are working hard every day to continually manage our major projects and several minor projects as well.

This slide provides a brief update on our three major capital projects. As you can see, the power plant in Nevada began commissioning work in Q1 of 2008. It is about 87% complete at the end of the first quarter and should be fully operational in the second quarter. First fire on oil and first fire on coal were both ahead of schedule, went well, and we continue to anticipate an on or before time delivery of this project. Projected annual savings to Nevada will be approximately $60 million, or about $25 per ounce. Of course that depends on production levels. This project is going very well in the project execution and turning it over to project operational phase, and we're very hopeful that it will lead to ongoing cost savings in Nevada. Second project, the gold mill in Peru is already ramping up. We were down there a few weeks ago, and the mill is operating as expected as we ramp it up. We still anticipate commercial operation in the second quarter. Higher recoveries from the mill compared to the leach pad is expected to add between 100,000 to 150,000 ounces of gold annually to Yanacocha's production. This project will be delivered on schedule and remains on budget with capital costs of $250 million to $270 million. And finally Boddington in Australia continues to advance, although we have had to work hard every day to keep the project on schedule, and within our current capital guidance of between $1.4 billion and $1.6 billion to our account, our share. We continue to expect the project to start up in late 2008 or early 2009. And as we have indicated previously, when fully operational, this will be the largest gold operation in Australia with our share of production between 650,000 and 700,000 ounces of gold. Our costs applicable to sales in the low to mid $300 per ounce.

Moving to the next slide, our advanced projects update. As I mentioned earlier, we completed the acquisition of Miramar on March 17th. We now have control of one of the largest undeveloped gold deposits in the world. We're actively investing and updating the camp infrastructure to accommodate a more aggressive exploration program planned for this year and beyond as we try to move a resource designation into our NRM. We're excited about this asset. And we will continue to keep you updated as the project advances through advanced exploration and into our capital effectiveness program and comes out with a project feasibility study, as early as late this year or the first part of next year. And we will continue to work on that project and keep you updated.

Conga in Peru is in stage 3 of our capital effectiveness program. The reserves as you know to our account currently stand at 6.1 million ounces of gold and about 1.7 billion pounds of copper. We continue with our evaluation process and optimization process around the development of this project, continue to build on our relationships within the community. We continue to work with our contractor on making sure that we have the best development plans that we can come up with. And we anticipate a development decision on this project by the end of the year.

And with respect to Akyem in Ghana, the only new news is that we have filed with and the Ghanaian EPA has accepted our submittal of a revised draft environmental impact study completed on April 23, 2008. The permitting process continues and again we expect and hope we can make a development decision on this project at the end of the year as well.

So in addition to completing three major capital projects, the power plant, the gold mill and Boddington, next, early this -- late this year or early next year, we have an exciting pipeline of advanced projects that represent the next generation of our major capital projects and the next generation of our production.

As Russ indicated, moving to the next slide on Batu Hijau, we've revised our 2008 production guidance downward slightly at Batu Hijau. This slide provides the explanation for that revision. Higher than forecasted rainfall -- in fact, rainfall well above the P90 levels, will impact our production during the remaining portion of the year. As you can see from the chart on the right, the red line represents the cumulative P50 rainfall in the pit area and the blue shaded area is the actual amount of rainfall. At these levels we will spend more time pumping water out of the pit, leaving us with less production time during the dry season at the bottom of the pit.

Additionally, this year, we were impacted by the fact that we were not able to secure the renewal of our foresty permit. And because of that we had to divert additional water into the pit. There has been some minor damage to the pit infrastructure sloughing due to water. And as a result of that, we will have some more time in the bottom of the pit to clean out the remains of that sloughing that has occurred at the bottom of the pit. Production will really be impacted by the extent of the dry season access that we have in the second half of 2008. Notably as we indicated in our press release, potential production shortfalls due to restricted access in 2008 are expected to be recovered in 2009. And you can see the revised guidance for Batu Hijau with respect to both gold sales and copper sales at the bottom of slide 10.

Moving to slide 11, with respect to divestiture. One piece of news on this in the third bullet point where you can see the divestiture process continues in parallel with the arbitration process. We have offered under the terms of the contract of work 7%. This is what we refer to as the 2008 vintage of 7% for $426 million or at the 100% level at $6.1 billion valuation for our investment in the Batu Hijau and a long contract of work. I would say that with respect to international arbitration, both the government and Newmont continue to follow the contract of work in each of the areas and we continue to work forward on the arbitration process, both of us having to point at our arbiters and the process continues and we will work expeditiously to get to the result that we both feel is fair.

So in closing, moving to slide 12. This quarter reflects strongly on management's commitment to do what we say we're going to do. We said in 2007 that if we were a gold company we should provide exposure to gold price. We got rid of the hedges. You can see the impact of that. We said we needed to further focus on costs. You can see the cost improvement profile in the business over the last three quarters. We said we had had to successfully execute on our project pipeline -- as you have heard on both the power plant and Yanacocha gold mill we are delivering at and in front of our schedule and at or below the projected costs. We still have challenges in delivering at Boddington that we will continue to keep you updated on, but I can assure you that Guy Lansdown and his team are absolutely focused on bringing this project in in the best way possible, in what is as I mentioned before, a very competitive environment for projects. All of that means that we are on plan for what we need to do. We also know that our plans have to be sustainable, that we have to be committed every day to our results. And that one quarter doesn't make a successful turnaround. We now have three quarters in a row. But we are heads down focused on execution, and if we continue to be successful in that, we do believe shareholder value will increase. But we would encourage you to continue to hold your investment in what we believe is the highly leveraged -- the most highly leveraged gold investment that you can make. Thanks for your attention and we take your questions.

(OPERATOR INSTRUCTIONS) Our first question is from John Hill.

Thank you, good morning. And congratulations on a strong result. It must be great to see all the hard work starting to pay off.

It is, thank you, John, appreciate that.

Obviously there were some things that went your way in the quarter. Things like inventory, draw down and price participation. But it seems like you have got some positives coming in the back part of the year with the new mill at Yanacocha. In a way, though, doesn't that make the swing operations, the really key ones. In other words, maintaining that performance at Phoenix and in Ghana so we can really benefit from the new mill later in the year? How confident are you that we can sustain these kinds of results in these operations which have been challenging but look somewhat better here?

Well, as Russ indicated at Phoenix, we had a good quarter at Phoenix. But again a good quarter doesn't necessarily say that we have got this thing fully turned around. I would tell you as we said at our analysts meeting as we said last year, we're focused on delivering the mine plant at Phoenix mid-year, so we'll give you an update in July when we next release earnings and tell you how really feel about Phoenix. What I will tell you is that Brant Hinze has led a tremendous effort over there in Nevada, not just at Phoenix but across the Nevada operation. His team at Phoenix has been clearly focused on delivering true operating results. Highest mill throughput we have had to date. The team is really focused on recoveries. We have finished all the drilling we need to do at Phoenix. I think we will see some sustained improvements at Phoenix again. We will communicate those results later in the year. But across the Nevada operation, Brandt and his team are really doing an excellent job of leveraging the portfolio, looking for areas of improvement. So it is not just Phoenix -- it is all the operations in Nevada that have to deliver. And I think Brant and his team are committed to doing that. With respect to Ghana, clearly power availability will continue to affect our performance over there. We continue to look for opportunities to deploy the power plant that we imported and have built over there. We hope that over the next period, that the government and Newmont can continue to work on ways to allocate power appropriately. And we have just -- seen some infrastructure investment which hopefully will allow some of these power spikes we had to endure in the first quarter to go away. So I hope, John, that as you said, the outlie production from Ghana, the production from not just Phoenix but all of Nevada will be in line and will continue to be able to benefit from those improvement that we see from the other operations.

Great. Great perspective. And just a quick follow-up. Do you -- at current gold prices, see the company being cash flow neutral on a go forward basis? Or do you still see a cash deficit for the year as being a subject that needs to be addressed?

At these gold prices, we will be cash flow positive for the year. Net cash flow positive for the year.

Great. Thank you.

The next question is from John Bridges.

Hi, Dick, everybody.

Hey, John.

Well done with the progress. Just want wondered what happened with Ahafo -- just wondered what conspired to give you grief there?

Couple of things. All -- I will do one then Russ can talk about it as well. But, we had a mill motor that went down in the first or second week of the quarter. And it took us a little bit of time to get a repair in there. And that just took time for us to get the inventory through the mill once we got it up and operating. Also we had some power spikes, Russ, you want to say more?

That was it, John. We had issues with the gear box. We did have warranty claims in, but the warranty claim doesn't get that production back, so we have repaired the box and we have used some of the material that we have on site for Akyem as a short term plug, if you want, and we're backordering that. Those are behind us. As Dick said, the biggest issue quite frankly was an additional transmission line that was put in. So we now have a backup or redundancy in the transmission line into the plant from the grid which really is only coming up or -- I guess it is still coming up in April which is going to make a big difference. The up and down is what causes those big gears, gear boxes to really have a problem. Once they get up and running they are fine. It is the stop, start and an unplanned basis that cause high maintenance issues.

It is a bit of bad luck because the -- the Ghanaian operation, Jeff Huspeni, our Regional Vice President over there, and Trent Temple, the operating guy over there, have really done a good job of just continuing to deliver over there. And it was a bit of bad luck. I think without that we clearly would be on plan. And they have every expectation to get those ounces back. If we don't get them all back this year they will be available next year so.

Okay. Any update on Phoenix? There was a study that was going on, I believe you were going to have some output from that about now?

Yeah. I -- again, John, I think we will be prepared to talk about that in July. This year we will have on the earnings call mine [plans] should be complete. It is on schedule to be available then and again, good results for the quarter. We just got to get the mine plan out there.

Okay. Great. Congratulations again on the progress and good luck, guys.

Victor Flores you may ask your question.

Thank you, good morning. I was hoping you could give us a bit of more detail on how you see the ramp up at Yanacocha progressing throughout the year. Just looking at what you have achieved already in the first quarter unfortunately paints a rather ugly picture for the rest of the year, given higher, much higher costs and lower production. Yet you have the mill coming on stream. I was hoping you could perhaps give us a bit more of an idea of how you expect production and costs to perform throughout the year.

Yeah, I would just say, Victor, remember that this is not a quarter to quarter business. As we describe in our 10-Q, Yanacocha this year expects its production to actually be back end loaded. They have stripping that they are into the first quarter of this year. They didn't get as much down on the leach pad in the first quarter as they will throughout the balance of the year. And really, the mill is going to be an additional -- and it is as we said on schedule. So it should provide additional production towards the end of the year. So at this point, with our plans, we see we're just where we expected to be at Yanacocha

Just on particular on the ramp up, the ramp up is going well. And we are slightly ahead of our curve that we had plotted to get it into commercial production. We have had the usual start up and [teething] issues but the team is confident that they will deliver at least what they said in the budget despite a couple week delay in actually getting the mill turning. The ramp up is going very well. We have people from a number of Newmont operations around the world quite frankly that have gone there on a short term basis to assist with that ramp up, so it is going very well. And it is really testimony to the efforts of [Tim Hackney] and the projects group down there that this project has been delivered in the fashion it has.

Can you give us us a sense at this point as to how many tons you expect to process from the mill, say in the second half and roughly sort of grades and recoveries?

Victor, a little early for that, but we will commit to provide that to you on the second quarter call along with Phoenix. We're still ramping up. We are at about 30 to 40% by the end of March. So it is still too early really to tie that down. But we will definitely give that to you in the Q2 call.

Or we will ask the guys on the site visit.

There you go.

All right, great. Second question goes to Leeville. I was reading through the queue. It looks like tonnage has improved quite a bit relative to a year ago. Can you just give us a sense of how you see that operation performing going forward?

Again I think a tribute to Brant and his team over there. They have got the back fill situation going. The back fill plants are operational, really were at the end of the year. We're starting to see as a result of the ramp up through 2007 the careful and expected ramp up of Leeville that we're now in the operational phase of really being able to get after what we see at Phoenix. So, we continue to see grade levels that are at or above what we expected. Tonnage movements underground are going well and we're actually getting very comfortable with the back fill methodology and being able to move through in our drifting programs in a very acceptable way. And so at this point it is really going pretty well.

Victor, I would add Brant's team has done a good job getting underground workers trained up. We're transitioning contractors out and transitioning there to employees which will impact positively on the cost structure. And then, some interesting exploration results quite frankly outside of Leeville toward the turf deposit that you may remember from one of your visits out there that is starting to show interesting results. So we're very excited quite frankly about the direction in which Leeville is headed.

Great, thanks. That was going to be a follow-up which was the -- you have sorted out the infrastructure but the labor issues sound like those are getting sorted as well?

Yeah. And this goes back to a program Brant started over two years ago to really put a number of resources into the training department and reinvigorate that effort. But again it is a long lead time to get people trained up. But we're starting to see the benefits of that, and we will continue to see this move from contractors to employees.

Great. Thank you, thank you very much.

Thanks, Victor.

The next question is from Brian MacArthur.

Good morning. Just reading through the queue I was wondering if you could clarify this. You mentioned your presentation this permit you have to get for, by June of this year, it sounds like you sort of think you will get it, but exactly what has to go on there and how that could impact things in Batu Hijau?

This relates to our pinjam pakai, which is foresty permit we need to disturb pregrowth in the area. And really it is more about the maintenance of water and erosion than it is about cutting the trees. But we had a permit actually that we secured early in the life of the operation. That permit came up, is supposed to come up every five years for renewal. It has come up in 2005 and we have been working on, but just have not received renewal that we need at this time. With that, we are in a position where we can't cut trees. We can't disturb areas where we actually need to -- to expand the waste dump.

As a result of that, we are in a position where we one, had water going to the pit because we weren't able to divert in and around -- and back into the jungle. We had to take the water and put it into the pit. Secondly, if we don't get the permit, in a reasonable amount of time, we will be in a position where we will probably have to lay off some employees and shut down some trucks. And as a result of that, a -- change the longer term nature of the plan. We don't have the full impact of what that would do to the life of mine but in the next few years we don't anticipate a big change in production. We are working very closely, with the Indonesia government at all levels and we had do hope that we will be able to secure the permit here in the next -- in the next little bit.

If we don't get it early in the dry season, there will be some other impacts, as we are working several projects over there, that would take a longer term commitment towards having the pinjam pakai and those projects relate to both the third sag mill at Batu Hijau as well as a pit water tunnel that we're working on -- pit water shaft to try to remove water in a more efficient way. So that is a -- those couple of things are really going to be combined here, and Russell Ball and myself, our Associate General Counsel Blake Rhodes -- we have all spent time over there working on this permit as well as continued day-by day effort of our Indonesia office. All I can tell you is I think we get support at all levels of the government. We're hopeful we're going to get it. And we're hopeful that we're going to get it soon.

Okay. And another question just for Batu, you have now got a third tranch to quote unquote parts of the Indonesian government. Is this new tranch going to the same potential buyers as the other two previous tranches that all had different valuation metrics, or can you just bring me up to date -- you have three separate valuations, three different points in time, you've got three different parties here that we're all negotiating. How does it all tie together now?

Yes, Brian, Russ. The 3% from '06, the 7% from '07. Those are the ones subject to arbitration. We have identified parties that have expressed an interest in regard to the '08 7%. At the $6.1 billion 100% valuation we received notification from the Indonesia government that they intended to exercise their right of first refusal on that and acquire the shares. However they have not provided us with which branch of government would be the buyer. So we're working through that process as we speak.

Okay. So the first two you know the -- they are all set up. Two parties, you debate how you're going to do it. You debate price, you debate how you pay it, where this one is kind of farther behind in the process.

In regards to the first two, the price is fixed at the $109 and the $286 for the 3% and the 7% respectively.

Right.

We're still debating who the buyers of those would be and again that is really the gist of the arbitration.

Right.

In regards to the 7% from '08, the government has clearly said with within the 30 day period that they intend to exercise their rights. However, we don't know which particular arm of the government will acquire the shares. But they have indicated they would be acquiring them. We still need to finalize the valuation for those shares.

Okay. Great. Thanks very much.

Thanks, Brian.

The next question is from Oscar Cabrera.

Good morning, gentlemen. Congratulations on the strong results. Just following up on Brian's question on Batu Hijau. To let me understand, you -- if you don't receive this permit in June, then this would get delayed. But in case you do receive it, how long do you think it would take for you to complete the pumping system, or the tunnel system so that you don't have the same occurrence if you had same amount of rain next year. Is this a 12 month project? Is it more than that?

There is actually a couple of projects, Oscar. If we get the pinjam pakai in relatively short order we can go in and do the dry season work this year and mitigate a lot of the impact by getting that water out and around the pit. The pit water tunnel is a two-year project, and as Dick alluded to is a roughly $50 million to $70 million for the first phase project. But that would take two years to get that out. What the pit water tunnel lets us pump from the bottom of the pit as opposed to have to pump out the ramp and have to move the pipes and the pumping system as the pit develops. So it is really an efficiency that will give us more time in the pit and reduce costs to reduce that water.

So there is really two -- two different projects. The one, the pit water tunnel that is the long term solution. Short term we have put additional resources to get the pumping out. The issue for us quite frankly and the rainy season has just ended. We're pumping the draw down slightly ahead of where were we expected to be. The issue, though, really is when the next wet season starts. And the wet season in Indonesia at least on Batu is roughly October 15. So if the wet season is a little late, we will actually be able to get to the bottom of the pit and get a lot of that production back. If the wet season starts early, we will just have a much shorter time in the bottom of the pit. The key issue is that the ounces aren't lost. The ounces and the pounds aren't lost. We will just go back next year and get them, but they would be pushed out from '08 into '09.

The other piece of the pinjam pakai, as Russell mentioned, is trying to establish the waste dump for future waste that comes out of the pit. If we don't get that, we will just have to figure out whether we actually move into a stripping program for phase 6, or whether we just go, forget the stripping program and go for production and delay the stripping to later date. So we have a lot of flexibility at Batu Hijau, but importantly, for our mine planning efforts we really need to get the pinjam pakai here in the next little bit or we will make some decisions and move on.

But just to be clear there would be no production impacts through 2011 which is the bottom of phase 5. Because essentially what we would do is delay stripping on phase 6.

Right.

The area where this waste needs to go is for the next big lay back. It is a little ironic because our results would actually be better through 2011 because we would effectively park trucks and not do stripping and essentially dive to the bottom of phase 5. That's obviously not optimum for the long term operation but that is some of the flexibility that Dick has alluded to.

In other words, so like lower production, better costs. For -- the alternatives if you get everything lined up, what type of production do you think you can get to?

We really haven't given those estimates for future years. Really our estimate for Batu for this year is the estimate we have given. And at this point what I would say is what we really anticipate -- as Russ said is probably better results as we would -- if we're stripping waste, we're producing from stockpile. If we're not stripping waste, we're producing from the pit. And if we're at the bottom of the pit, we're producing the highest ore possible.

Oscar, we will be in a fairly big strip campaign for phase 5 through '08 and '09. We will be in the bottom of the phase 5 in '10 and '11. So when you look at '07 we had significant production. That was coming out of the bottom. '10 and '11 is the bottom of phase 5. That's when we will really be in the sweet spot once again. So '08 and '09 we will have lower production levels because of the nature of the ore body.

Great, that is very helpful. Thank you very much.

Mark Smith, you may ask your question.

Hi, I have a couple of questions. Really, they are for Russell. Russell, perhaps you could just help me with the -- what were the realized prices for Q1 before the inventory adjustment?

Before which inventory adjustments, Mark, sorry?

Before the adjustment from fourth quarter.

Yeah I mean -- they really weren't inventory adjustment. We just held that and then sold it in the first quarter. So, we did see a slight pick up because obviously the gold price and copper price was up. But the production from that inventory is reflected in the numbers, the $933 for gold and the copper. The -- the copper number has -- is impacted by the provisional mark to market. Again right at the end of last year, you saw this with Freeport's results a couple days ago. Copper prices were down. March 31, they were up. So, we mark that provisional pricing to market. So, we had for the quarter and you will see this on Page 29 roughly of the queue. I'm not sure what the final page was on the version we launched last night. But, the spot or price we received before hedging was $3.63. We had a provisional mark to market gain of $0.78 for a $440. And we had $0.30 in treatment and refining to put us at about $410 for the quarter.

Okay. And the -- and the gold? I mean you were also on the gold?

Yes we were.

$10 or so.

Yeah, $4 or $5 of treatment and refining. Otherwise the $933 is effectively the price we got.

And it wasn't also in that same concentrate?

We had --

That difference?

We had a little gold in concentrate at Batu but in the scheme of the Newmont it is de minimis.

Well, congratulations. I mean $10 above spot basically. And just in the second question, did the original guidance include that adjustment in moving community development administration -- regional bend royalties and so on and so forth out from cash costs into the other expenses? That's about $32 to [$39] an ounce?

It is about $12 plus $4 of accretion, Mark, for the quarter. And we -- so just stepping back, you're right, we moved those. They weren't in the budget. So what we have seen is effectively, the higher metal and FX being offset by that reduction. All the numbers in the queue are restated, or reclassified at least to reflect that change. So when we compare numbers year on year, they do reflect the similar transfer from the previous years.

No, I know I understand they are like that now. But I am just trying to get handle on the original. The guidance you gave me at year end. That did not include --

It did not include it.

This change. So we're over and above then. And then finally just on Kalgoorlie, could you give me an idea why we're up at nearly $800 an ounce?

Mark, that is a great question, and Brian Hill, who recently joined us in February, and his team in Australia are spending some time to understand that. There are a number of issues related to that, not least of which is the exchange rate. The legacy nature of the operation. Some increased stripping we have seen some grades, model grade biases down obviously. Some availability issues with equipment. So there are a number of issues quite frankly, and I would say that part of those issues are the ownership structure and the way in which the operation is managed. So, we have that on our list, if you want, and Brian is actively pursuing that with his counterpart down in Australia from [Barrack]. And we have committed jointly resources to really evaluating the operation from a longer term perspective. But it is a concern to us and it is getting our attention right now. It is a little early, Mark, to give you anything definitive on where that is going.

Okay but I guess, it is not just a -- a significant labor issue as well as --

No, it is a one time event. This is just something that we just really have to go in and dig into and figure out what we're going to do with that operation.

Is your new -- is your FX position or FX hedges going to help you with that at all?

It will help. We have started to layer into that program. We have about AUD$600 million normally hedged. We continue to layer into that program. It will offset or mitigate some of it but again at these levels of spot, significantly higher than what we had in the budget. So even if we locked everything today we would still be above where we were in our budgeted assumption.

Thanks, Russ.

Thanks, Mark.

(OPERATOR INSTRUCTIONS) David [Hausen], you may ask your question.

Yes, good morning Dick and Russ. If I have been checking off the various questions running through so far. But, something that caught my eye was Nassau in Suriname. At the analyst day you had positive words to say about it, but text does describe further exploration but didn't appear in your slide show. Do you have any update on that?

Steve Enders, I think you're online. Do you want to give a quick update on those projects?

Sure can. Can you hear me?

Sure can.

David, we talked about Nassau at our analysts day presentation. This is our joint venture with Alcoa, in Suriname. It is currently in our stage two of our stage gate process. Headed for [Jinan] whether we declare our non-mineralized reserves there at the end of that stage and probably fourth quarter or not. And we're encouraged with our results so far. And we will see where that one goes. So it is progressing as planned right now.

So it is a little behind the other three that we saw in the slide presentation, then?

Yes, it is.

It is as a matter of fact. I mean it was a green fields discovery. Those always have a longer timeframe to get to this point.

Okay. Now another question going back to Ghana that has been fairly topical lately. Do you have any perspective on the comments we have seen coming out of the minister recently with regard to the government wanting a little bit more exposure if you like to the revenue coming out of mining?

Yes, I would just tell you we have seen those announcements. We have not seen anything definitive come out that would impact us directly. We had do have relative to our original investment an investment agreement which protects us from increases like that. I will tell you that when we find out what the direct impact will be of course we will sit down with the government and we will talk with them about what their intentions are, what the results would be for us. And we will figure out the right way forward. That's what we will do. That's what we would do everywhere, not just in Ghana. So hopefully as a result of those discussions we will come up with something that makes sense relative to both their commitments to us and our commitments to them.

All right. Still in Ghana, can you explain more about this power situation? I thought the hydropower had got back to normal? Are we getting back to a drought situation again?

Yes, actually levels in the hydrofacility are at pretty good levels. Unfortunately they produce a lot of power from hydro. This is a year where they seem to be producing some earlier in the year. We will just have to see what happens with the continued rainfall later in the year. At this point, what is really impacting our operation is not so much a power unavailability as it is power spiking. And that has led to some issues with respect to the mill as we talked about as well as power availability. But over time, we're just going to have to continue to manage the power situation in Ghana. There is no silver bullet here.

All right. And I guess that feeds into what the decision might be for Akyem going forward.

It does absolutely.

All right, thank you very much.

The next question is from John Tumazos.

I don't want to set the bar too high, after the good performance. But if Phoenix continues above expectations and the water issues at Batu Hijau can be rectified, there is a possibility that you come in at the low end of your budget?

With respect to costs?

$420 to $450 range.

There is a lot going on as you know with respect to escalation of other areas of the business. Pretty early in the year to forecast that. I just say we continue to be comfortable with our guidance estimates.

There had been a power plant venture among the several gold companies operating in Ghana. Presumably with the below budgets output and mill throughput in the March quarter, there must have been some other base level of the power supply that got undermined that sort of diluted the efforts of the group power plant -- is that the case?

The group power plant is in place. We did have issues ramping it up and we're still working on optimizing the production out of there. We had a fire at one of the units. We have gone in and fixed that. But again, this really, our production at Ahafo was not so much power shortage as it was just the inability of the system to manage power in ways which delivered clean power continually. That led to some ramp up and ramp down issues at Ahafo.

Oh, it was a transition rather than generation system.

Yes.

Over time, and -- and as I mentioned, additional infrastructure has been completed by the Ghanaians. We expect that issue now that we have two ways of bringing power into Ahafo should be improved going forward. That will -- that improvement in the transmission system will not bring additional generation capacity, but hopefully cleaner power. To your point, the MRPs of the power plant that the four gold companies has put in place is still planning to bring additional production into Ghana. We hope that that will allow us to continue to benefit from allocation of power shortages, consistent with allocations to the general public. There will still be power shortages in Ghana over the near term as we have not seen any new generation but for what we have brought in coming into the country.

Thank you.

Our final question is from Mark Smith.

Hi guys. A quick follow-up. Your exploration spending and expense development spending was a little lower than sort of a quarterly average for the year. It -- is that just due to waiting to get onto the Miramar property? And also when would you add the current 43-101 Miramar 10.7 million ounces to your resource base?

I will address the first part of that. It is really due to the ramp up that we see at Hope Bay. That really only, we got going in late March. We do have the drill is on the ground, and we're seeing the spending increase in line with our numbers. So really it is just a timing issue. As far as 43-101 equivalent, I will ask Steve Enders to give you an update on that.

Yes, Mark, there is a significant difference between 43-101 resources and what Newmont declares as NRM. Certainly a lot different than what we declare as reserves. At this point we're looking at completing stage 2 end of this year or early next year, which would get us NRM. And it would be some subset of the 10 million or so ounces in Hope Bay's or in Miramar's 43-101 resource base. We will gradually convert those over time as we continue our exploration program.

Perhaps you will actually get more than that?

That is the whole plan but you can't get it all in one bite, right?

All right. Thank you very much.

I think it is important to note that we won't book any reserves this year. We just can't physically get the work done given the infrastructure upgrades and requirements and the amount of drilling it's going to take. Don't look for reserves this year. But as Steve said, we will just be working through with the passage of time.

I was just looking for MNI and inferred.

Okay. Keep looking. We will bring it in.

All right. Thanks.

Okay. So thank you very much for your attention today. And we will look forward to another call in July.

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