紐蒙特黃金公司 (NEM) 2008 Q3 法說會逐字稿

Welcome, and thank you for standing by. At this time all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. (OPERATOR INSTRUCTIONS) This conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the call over to Richard O'Brien, President and CEO. Sir, you may begin.

Good morning, everyone. Thank you for joining us on our conference call today to discuss Newmont's financial results for the third quarter. With me in the room today 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 once again remind you that we will be discussing forward-looking information involving a number of risks, certain of which are unique to our industry, as further described in our SEC filings.

Turning to slide three, when I became CEO of Newmont, the strategic direction that I framed for our employees, our management team, and our shareholders was centered on a renewed focus on our core business and a commitment to daily operational and project execution. Execution should be measurable, and just over 1.25 years later, our strategic foundation is comprised of exactly the same principles, and we openly measure our performance against our metrics on a quarterly basis with this corporate score card. As illustrated on the slide, we clearly have made substantial progress over the last 16 months. But it's also evident by the unchecked boxes that we have much work left to do. As we continue to execute on our plans, we are again maintaining our original 2008 production and cost guidance. We keep this particular box unchecked, however, as a constant reminder that this is a daily requirement of our business.

On our second quarter earnings call, we highlighted the successful delivery of two major projects -- the Yanacocha Gold Mill and the Nevada power plant, both of which are performing better than expected. We still have one major project in the execution stage -- Boddington. As I'll talk about in a moment, we are revising upward our capital cost on this project and we must now absolutely ensure that the project is delivered on schedule, and within the revised cost guidance. We continue to work on our major development projects, those being Conga in Peru, Hope Bay in Canada, and [Achim] in Ghana through our stage gate process. However, considering the global financial market turmoil, we are reviewing the ultimate development and timing of each of those projects.

We also continue to work on resolving the Batu Hijau divestiture issue in Indonesia. Newmont and our partner Sumitomo have selected our arbitrator, as has the Indonesian government, and together we have selected an independent arbitrator. The initial arbitration hearings are scheduled for December. As we have said all along, Newmont remains committed to our divestiture obligations defined in the contract of work. We will keep you informed as we progress through the arbitration process.

Turmoil in the financial markets has dominated the news over the last several months. Due to the current volatility in gold and other commodity prices, as well as the collapse of the global financial markets, we will exercise even greater discipline, actively managing our capital projects, our exploration, and our other spending, and taking prudent steps to preserve our balance sheet strength and liquidity, while maintaining the flexibility and optionality we have in our project development and exploration pipeline. We will continue to balance short-term market gyrations with the long-term positive view we have on developing, exploring for, and acquiring gold resources.

Moving to the next slide, as we look at the year-to-date and third quarter highlights, I'm pleased to report another quarter of solid operating and financial results, as we continue to focus on operational and project execution. And importantly, we are maintaining our annual equity gold sales and cost applicable to sales guidance for 2008. Our adjusted net income for the quarter was $176 million or $0.39 per share, and we reported net income of $196 million or $0.43 per share. These results were adversely impacted by a mark-to-market loss on provisional copper sales of approximately $0.03 per share. The previous year's quarter was positively impacted by copper sales from Batu Hijau as we were mining from the bottom of Phase 4 and sold 163 million pounds of copper or roughly four times that sold in this quarter. As we have explained previously, the production at Batu is a function of mine sequencing and we expect to be back in the bottom of the pit in Phase 5 in 2010 and 2011.

During the third quarter we sold approximately 1.3 million equity ounces of gold at an average realized gold price of $865 per ounce at cost applicable to sales of $480 per ounce, resulting in net cash provided from continuing operations of approximately $200 million or $0.44 per share. Despite lower gold and copper prices in the third quarter, for the year we've generated net cash provided from continuing operations of approximately $1.2 billion.

Looking at our equity gold sales and cost applicable to sales by region, we're generally performing in line with our plans. In Nevada we sold 544,000 ounces of gold in the third quarter, slightly lower than our expectations, primarily due to the continued suspension of operations at the [Gaucho] mine and the Yukon Nevada gold processing facility. We also experienced slower recoveries at the Carlin South and Twin Creek's leach pads and lower through-put at Midas. We still expect to be on track for the year as we anticipate making up much of the shortfall in the fourth quarter as the [ontis] come off of leach pads later this year.

Cost applicable to sales of $497 per ounce during the third quarter were also higher than expected due to lower than expected gold sales, continued higher diesel and contracted service costs, and lower byproduct credits due to lower copper prices and volumes, partially offset by energy savings from a full quarter of commercial operation at the Nevada power plant. At Yanacocha, our sales were slightly ahead of expectations as a change in mine sequencing earlier in this year resulted in more leach tons placed during the second quarter, leading to higher production in the third quarter as these ounces began coming off the pads. In addition, production from the recently completed Gold Mill exceeded expectations with through-put, grades, and recoveries all higher than expected.

In Australia we continue to benefit from higher grades at Jundee and higher recovery at both Jundee and Wahi, which were partially offset by lower grades in recoveries at Kalgoorlie and Tanami. The higher than expected sales also contributed to driving our costs applicable to sales for the region lower than our original expectations.

At Batu Hijau, equity and gold copper sales were lower than expectations, primarily due to the timing of concentrate shipments, that resulted in equity gold and copper production of 20,000 ounces and 11 million pounds respectively not being shipped during the quarter. Our estimates indicate that this build-up of inventory at the end of the quarter increased our cost applicable to sales by approximately $115 per ounce and $0.27 per pound. In addition, equity gold and copper production was slightly lower than planned, as through-put was lower than expected due to harder Phase 5 ore and limited access to Phase 4 ore caused by extensive rainfall as we talked about during the first half of 2008.

At Ahafo in Ghana we sold 141,000 ounces of gold in the quarter, slightly higher than budget as we continue to see higher grades and recoveries, partially offset by lower through-put. We continue to benefit from higher than planned availability of power from the Volta River Authority, which has again had a positive impact on our cost applicable to sales, despite a rate increase for power that came into effect on July 1st of this year. And finally, cost applicable to sales in our other operations were significantly higher than expected, primarily due to cost applicable to sales of approximately $1,300 per ounce for the quarter at Kori Kollo in Bolivia due to a leach pad write-off as a result of lower than anticipated recoveries, additional Bolivian royalties, and higher fuel costs.

Slide six demonstrates our cost applicable to sales would have been if we were able to use copper revenue at Batu Hijau and cash distributions from investment in Canadian Oil Sands Trust as a credit to our costs. As illustrated in the chart, our GAAP costs of $438 per ounce would have been $339 per ounce net of copper revenues and the distributions from Canadian Oil Sands Trust.

As reflected on slide seven, we've made some minor adjustments to our regional costs applicable to sales guidance, but we are pleased to report that we are once again maintaining our 2008 equity gold sale guidance of between 5.1 and 5.4 million ounces and our costs applicable to sales guidance of $425 to $450 per ounce. We're also maintaining our current copper sales guidance of between 125 million and 150 million pounds at costs applicable to sales of $1.50 to $1.75 per pound.

Slide eight summarizes the rest of our financial guidance as of the end of the quarter. We slightly increased our interest expense guidance to reflect higher borrowing cost and have slightly lowered our effective tax rate guidance, reflecting revised estimates for reserves for uncertain tax positions. All other guidance remains unchanged.

Slide nine illustrates the breadth and depth of our project pipeline and where each project sits within our stage gate framework. I won't go into detail on each of these projects, but I want to continue to emphasize that we have several multi million ounce gold deposits in stage two and above, and that we have flexibility with respect to the development schedules related to those projects. As previously mentioned, all stage gate decisions are undergoing additional scrutiny as a result of volatility in the markets.

Turning to slide ten, I want to talk about Boddington. At the end of the third quarter, the project was 85% complete. We continue to expect project startup in early to mid-2009. With respect to the capital estimate, during our second quarter earnings call and at the Denver Gold Show in September, we committed to finalizing the review of capital costs and discussing those costs at this time. Based on our newly revised estimate, our capital cost estimate now stands at -- sorry, we have moved our capital cost estimate from $1.4 billion to $1.6 billion to $1.7 billion to $1.9 billion. That is Newmont's share for the Boddington project. About half of the capital cost escalation from our previous guidance is a direct result of an approximate three month schedule extension, mainly due to lack of construction, resources with the remaining 50% attributable to cost escalation, primarily labor and steel. Now that the project is 85% complete, and knowing that we have approximately 90% of the remaining capital expenditures hedged, we're confident that we will deliver on our revised guidance for Boddington. With the first five years of production averaging 600,000 to 700,000 ounces of gold to Newmont's account, at below industry costs applicable to sales, Boddington remains a cornerstone asset for the company. And it will remain so for a long period of time, as Boddington's life should be in excess of 20 years.

I'd now like to take a few moments to address the recent financial market turmoil and how Newmont is responding to these unprecedented times. The global financial crisis has clearly resulted in massive liquidation of portfolios across the board. Access to capital has essentially disappeared. For those lucky enough to be able to access the markets, it is very costly when and if you can get access to those markets. And commodity prices are extremely volatile and we would argue not reflective of the long-term fundamentals that typically drive commodity prices, our share price -- and also we believe that those commodity prices are undervalued even in the short term. Newmont is well-positioned in these volatile times with a strong liquid balance sheet and an investment grade rating. Our stage gate process will also serve us well as we must now exercise even more discipline in how we invest our capital and develop our projects.

As you've seen previously, we do have an extensive project pipeline. We will be reviewing it continuously for adequate project returns, to ensure we maintain an appropriate risk profile, and that we continue to focus on positive cash flow generation for the business. With respect to our three largest new projects that I mentioned earlier -- Conga in Peru, Hope Bay in Canada, and Achim in Ghana -- all of these decisions are under review until we fully understand the impact of today's adverse market conditions. In fact, as you would expect, all of our budgets are currently under review. Despite recent lower commodity prices, we remain bullish on the long-term prospects for the gold price. On the supply side, existing mine production continues to decline, and while the credit crisis continues, even fewer new projects will be developed, further squeezing gold supplies. We believe this will be exacerbated by tightening exploration budgets, and new gold discoveries have already become hard to find.

Looking at the financial indicators, although the US dollar has strengthened relative to the Euro recently, we believe the US dollar will decline relative to Asian currencies as the US Government continues to inject liquidity into the market at unprecedented rates. That will be good for gold price. Finally, we've seen gold's equity valuations come down in this market as people have had to liquidate their portfolios and raise cash. As a result, we will continue to monitor the industry and be opportunistic with respect to accretive acquisitions to augment our growth strategy.

Couple of slides quickly on our liquidity profile. As I said, we must continue to focus on this. Slide 12 summarizes our current liquidity position as of the end of the quarter. As you can see on this slide, we have cash and marketable securities of about $1.9 billion, plus an additional $700 million capacity under our revolver. And as this slide shows, the next slide, our liquidity profile on the previous slide provides significant capacity to repay our debt for the next several years as well as sufficient capital to complete Boddington. Thus, even at lower gold and copper prices, we don't need to go to the market to raise capital currently to deliver on our plan.

In closing, our company and our industry are currently operating in an unprecedented macro business environment, consisting of extreme commodity price volatility uncertainty, mass portfolio liquidation, global inflation, and limited if any access to capital. However, Newmont is well-positioned to respond to this market uncertainty with a strong liquid balance sheet with an investment grade rating. We have an attractive project pipeline that rests within a disciplined stage gate framework, allowing maximum flexibility and the preservation of optionality with respect to the timing of the development of our next major projects. We will continue to evaluate the acquisition landscape to be opportunistic if and when an accretive acquisition arises that adds value for our shareholders.

Before finishing our presentation today, I would like to take a moment to pay honor to the life of Ron Keen, a long-time employee at our Nevada operation who recently died in an accident at one of our Carlin truck shops. Safety is our number one priority at Newmont and we take it personally every day. Whenever we have a tragic accident like this, we redouble our efforts to ensure our employees remain safe. We are keeping Ron's family in our thoughts as they go through this difficult time.

With that, I would like to thank you all for listening and open it up for questions.

Thank you. (OPERATOR INSTRUCTIONS). Our first question is Patrick Chidley with BJM.

Hi, good morning, everybody. My question goes to the low tax rate that you reported for the quarter -- maybe you could expand on that?

Patrick, I'll ask Dave Gutierrez, VP of Tax and Accounting, to speak you through at a high level. We'll just point you to a slide if we could just flip through you to I think it's slide 17 which shows the reconciliation of GAAP net income to the normalized income. And if you have a look at that slide, you'll see there are two tax adjustments on that slide, which we took into account to reflect the lower tax rate for the quarter. So if you -- we're just pulling it up on the screen here. Hopefully we can get -- 16, I think it is, Patrick, yeah. Hold on. Let us get there.

So if you have a look at the slide 16, which hopefully is up on your screen, or if you have the presentation downloaded, you'll see two adjustments essentially adding back for tax plans during the quarter, the $19 million that showed up in discontinued operations which related to the Newmont capital IPO as we trued up our tax estimate for the gain. Remember, we took that gain on sale through discontinued operations, so we took the tax gain too. So we added that $19 million back because [Kaliet] related to a one off type transaction. And then the other $18 million that you see up top that we're reducing to get to adjusted income relates to tax restructuring on the big restructuring that you saw in Q2, which you'll see in the year-to-date column now shows up at $147 million. So we reflected both of those in trying to get to an adjusted net income number, and I'll have Dave speak to some of the detail on the quarter.

Right. And for the quarter, we had -- we released from our reserve for uncertain tax position amounts related to several items that got resolved with the Internal Revenue Service. Also, as Russell also mentioned, the restructuring true-up occurred not only regarding the IPO sale from last year, but also in terms of the filing of our tax return for 2007, where we had incremental amounts of depletion and -- related to the operations for 2007. So those are the primary drivers for the quarter.

Okay. And could you tell me when you choose to release amounts from the reserves, is that done at your discretion or is it done according to a scheduled timetable?

No, our policy is to release reserves only when items are resolved with governmental agency or the statute has lapsed. So in the quarter, since our US tax return for 2002 to 2004 got resolved -- most of the matters got resolved in this quarter -- we released the reserves related to those years.

Okay. And how much was that?

It was approximately $30 million.

Okay. All right. Thanks very much.

Our next question is from John Bridges with JPMC.

Good morning, everybody.

Hey, John.

Just wanted to play devil's advocate here a little. Congratulations with staying on track with your production target. But when we spoke a year or so ago, you were trying to figure out what the right approach was with gold mines, particularly given how the gold ETS has been performing, showing -- investors like to see gold actually stay within the companies. Any thoughts on producing versus keeping gold in the ground after another year in the seat?

Good question, John. I think one of the goals that we have in the company -- sorry, John. One of the goals that we have at the company is to continue to look at preserving the reserves that we have and adding to them over time that so that we can really have a long-term, more sustainable business model. Whether or not producing today versus holding gold in the ground is a fundamental way that we would decide that is still I think up for discussion. The reason for that is because we already have assets in the ground, trying to get return on those assets through positive cash flow generation is absolutely a priority for us. I think at the margin, your question really comes to more marginal ounces with higher cost, both capital and operating costs related to them. And I think as we have continued to look at the business model here, as we look towards the future for generating gross positive cash flow from each of the pits we operate from, I think more and more we will be taking a look at marginal production to see if that marginal production actually does make sense to produce now or to leave in the ground. So I think we will continue to balance mine plans which at some point demand that we either produce or leave behind ounces, with positive cash flow generation as sort of the targets that we're looking at. And in this kind of market, John, I think that question is really one that we will have to answer here, even as we look into next year.

John, Russ, just adding to that. In the short term we did leave a little bit of ounces in the ground, as you'll note looking at the third quarter and backing into the year, the 5.1 million to 5.4 million. As we said, we did leave some ounces in the [ground] in Batu Hijau in Indonesia. Those will come out. We are out of the bottom of the pit, effectively basically today with the rainy season having started. We will see a better fourth quarter there. And Nevada, again, we've loaded the ounces on the pad so those will hopefully come out in the fourth quarter. Again, we are trying to get away from the back end weighting as we've spoken to you folks about for a year now. Some events transpired this quarter which have pushed some of that third quarter production into Q4, so that's the shorter term picture.

Our next question is from Heather Douglas with Thomas Weisel Partners.

Hi, good morning everyone. I was hoping you could give you a little bit more color on what is happening at Boddington. You said in your release it's 85% complete. What still needs to be done? What's sort of the steps you're commissioning over the 12 months next year and can you tell us what your revised cost estimates are in particular some per ton costs?

This is Guy. Good day to you, Heather. Heather, we're 85% complete as you've correctly said. We have the remainder of construction to complete which is mainly the mechanical/electrical component of the project and from that we're going to commissioning and startup. It will be a phased approach which we will start early next year and through the end of the first quarter, early second quarter, we will begin to start up the plant and commence our journey into an approximate one year ramp-up. So I think that's -- I hope adds a bit of color around what's left in terms of construction.

It's Russ. As far as the cost per ton, we're actually reviewing our assumptions right now. I'd say back in July when we started our '09 budget and business plan, our assumptions for example were $900 gold, $350 copper, and $125 oil. Clearly the world has changed in the last couple months. We are going through a review process. In addition, what's going to cause us a little bit of accounting consternation is the delay in start-up which takes some of those mining costs and pushes them into capital. As Dick mentioned earlier, most of this or about half of the capital cost increase is related to schedules. So we take some of those mining costs and essentially capitalize them. So we're working through that, again. We had an [$0.875] in Aussie dollar assumption -- the world today looking at around $0.64 makes it very different. As we get numbers and we give you our '09 numbers in late February, we'll be able to give you some more color around individual operations and can address that point then.

To follow up on that, we have said that we do anticipate that the all-in cost applicable to sales at Boddington will be at or below industry averages and that's something that we continue to believe.

And in terms of a follow-up, how much mining is -- are you stockpiling right now because of the delays at the plant?

We're busy stripping at the moment, Heather, so we're taking non-ore material to waste at the moment. We do not intend stock piling significant amounts of material.

And as far as the phased approach for start-up, if we were trying to model through-put, we would put very little then in the first half of next year and then back end loaded, what sort of through-put?

That's correct. It's going to be a gradual one year ramp-up with not significant production in the second half of this year.

Okay. Thank you.

Our next question is from Michael Dudas with Jefferies.

Good morning, everybody.

Hi.

First question is relative to where $1 is relative to where energy prices are and of course the change every moment it seems, very volatile -- what's your viewpoint on aggressiveness relative to lock in as best you can current type levels of those commodities, especially given your viewpoint on where gold prices should be?

Mike, Russ. Good question. Yes, extreme volatility, what we have in place is a layered structured and disciplined hedging on the Aussie dollar. We've been legging into that for about a year now. We have accelerated that in the recent times to reflect what we believe is a dislocation with the Aussie trading in the low [60s]. We continue to leg into that. We will essentially -- and it's a three-year program. If you think out 18 months, you're effectively around 40% hedged. 18 months out closer to 80% on the short end. As far as energy, we're doing a little bit in Nevada, but to be quite honest, Mike, it's tough to get a derivative instrument that qualifies for effectiveness accounting. So as we look at some of the other parts of the world, the way the pricing structures work, we would induce significant volatility. So we haven't done a lot other than in the US where there is a liquid market and a tradable instrument that meets the effectiveness testing. In addition, don't forget we have about a quarter of our oil hedged to Canadian Oil Sands Trust, although it doesn't show up as a hedge obviously on the income statement. In short, stepping up a little on the Aussie dollar, we have locked in as Dick mentioned earlier essentially all of the capital, so we've eliminated that risk and we're aggressively adding to our position for operating costs for at least the next three year period.

My second question is compared to six to nine months ago and given the gross deterioration of capital access and cost, has there been a major change in the ability to maybe add to upgrade inventories through your stage gate process through acquisitions and has some of that -- maybe in this time of uncertainty you might be more looking at more closely?

Well, a couple things on that. I'd say we continue to maintain our fundamental belief that we need to build the business through exploration, project development, and acquisition. With respect to exploration and project development, I think we have a fairly sizable portfolio in both. What we'll be looking at is trying to maintain options while focusing on positive cash flow generation for the company, which means that some projects in the pipeline will surely be delayed, but we won't lose them. It will mean that some exploration projects will be delayed, but likely we won't lose them. With respect to acquisitions in particular, as I said, I believe that relative value for Newmont continues to put us in a position where we can now and I believe we will over time be able to look at that relative valuation, and whether it's projects in development that others can't complete because they have liquidity issues, whether it's exploration projects that we might be able to acquire instead of spending our own exploration dollars because the purchase of those may be cheaper than the development, or whether it's looking at other companies that might have relative valuations that have comparatively declined relative to ours -- I think all of those things will be on the table for us. And it's an ill wind that doesn't blow somebody some good, and I'm hopeful that we are going to be one of those companies that will benefit because we're going to stick to our business. We are going to generate positive cash flow. We will maintain our investment grade rating. And I think all of that should over time bode well for Newmont.

Well said. My final question, Dick, is -- this might be an easy one for you. Could you maybe discuss the disconnect we might be seeing in the financial markets for gold and the physical markets?

I will attempt to do so and then maybe Russ and John can jump in. But what we have seen and heard that is the physical demand for gold right now is very tight. Coins are less and less available. We have heard that there are people who are trying to borrow gold in the marketplace and finding that it's difficult to come by. That physical demand should translate to higher gold prices, and I think on the other side is just the fear that people have at the moment that holding any asset, maybe even other than a US Treasury, which now will get you the fine yield of 0.6%, I think is something that people really are worried about. And I don't think it goes to the fundamental value of gold. I think that fundamental value has unfortunately -- relative to their fear has slipped. So I think what I see is people trying to move towards Treasuries and I think over time as we see the US continue to print money, I think we will see gold price come back in that fundamental physical, the currency aspects, the supply and demand imbalance, I think all of those things will positively impact.

Mike, Russ. Just adding maybe a quick comment. What we've heard anecdotally is clearly cash is king with margin close in charge and it's not so much a question of what you want to sell but it's what you can sell. And in gold, one of the benefits of it is its liquidity and the fact that is a store of wealth and money. So we've seen indiscriminate selling to generate cash to repay and deleverage -- particularly on the hedge fund side, we have seen related to windows of hedge fund redemptions significant selling in the futures market, despite the strong physical. So I think you will see that process unwind and to Dick's point, if the fundamentals start asserting themselves longer term, but I think short-term -- and I think short-term could be up to a couple years in a very volatile market where cash is king and fear is paramount and we're seeing that and unfortunately gold is getting sold along with everything else.

You would think those margin clerks would accept gold coins, depending on what they look like. Thank you, gentlemen.

(OPERATOR INSTRUCTIONS). Our next question is from Barry Cooper with CIBC.

Good morning, everyone. Dick or maybe Russ, because I think you've been more intimately involved in this, and this is a question that I'm not sure that you want to answer or maybe that you can answer. But just wondering about the whole negotiation process at Batu Hijau -- what's likely to take place in terms of people's expectations and whatnot, given the regime that we're in right now? Obviously commodity prices have moved around dramatically. You had an agreement on valuation, which obviously I would say at this point in time is up for big negotiation changes. Then you had the whole issue of the other side getting the money in order to come up with their share of the component. Obviously a lot of moving parts there and whatnot. Just can you offer any expectations of what we might see in the coming months and whether this is something that perhaps just drags on forever?

Barry, it's Dick. Let me start and then Russ can add to this if he needs to. What I would say is with respect to what can we say, we can tell you what we've said in the past. We can't really predict where this is going to go. But what we ask have said in the past is we're absolutely committed to living up to the divestiture requirements under the contract of work. Under that contract of work, unfortunately we've ended up in a position where because of some of the points that you raise with respect to how do we sell, really there has not been an issue around valuation to date, but the how do we sell and to whom -- that really has led us to the point where we did end up in arbitration. That is scheduled for the first part of December. As I've said, as Russ and others at the company and I have told the government, we are continuing to hope that we can figure out a way to resolve this through continued discussions with the regional governments. If we can get that done, and we can agree on the appropriate terms, we could move forward in another direction.

That, however, is an alternative. It's not the main focus at the present time. So we continue to look at valuation in the commodity. We have not set the 2008 valuation yet. The other valuations were set historically. So it is difficult for us to call at the moment, other than we know we will have to divest. It's something that we actually acknowledge and really want to get done and we're still just trying to figure out through arbitration how exactly do we get that done.

Dick, does the historical valuations bear any relevance today?

Barry, good point. And again, our contract of work which is a 68 page document spells out basically the A to Z of operating that mine. It clearly never contemplated a situation such as this where divestiture wasn't affected around about the time of the valuation and we've seen a dislocation. I will say, though, that as we've mentioned before, the '06 valuation at $4 billion, '07 at $6 billion, on 100% basis. When you look at today's multiples and lower short-term cash flows it will impact that. Key in that valuation is your long-term assumptions. When we get to the bottom of Phase 6, which happens out in '16 to '17 to '18 timeframe, there's a lot of cash flow. So it is dependent on your long-term view and you've got to navigate through the short-term chop, clearly.

The other issue with the ill wind that Dick spoke to earlier is that some of the competing companies that had expressed an interest in providing finance to some of the local governments, the FT article as you probably remember from February, their financial situation has changed markedly with the current market dislocation and a lot of that is public and you can read about it. But suffice to say, the ability of people to raise what's approximately $400 million for 10% non controlling interest has been reduced and we'll have to work through what that means. I think short-term, though, we are all proceeding on the divestiture track. The government has honored its obligations. We will expect a decision next year. We still remain very confident in our merits, in the merits of our case at least. The resolution we have asked for is that we are allowed to divest on essentially a business to business, which means we'll divest or we're asking for relief to divest to Indonesian parties of our choosing. We have identified a number of those that we believe are very aligned with our operating philosophy and we hope to be able to affect that transaction shortly after we get it resolved from the arbitration panel.

Do you think you would entertain in essence financing those groups yourself with -- as basically loans with payback through cash flow?

Yes, Barry, we have. We offered in November '07 exactly that type of a non-recourse structure on where we would keep the economic interest and the loans would be non-recoursed to the local governments who we do want as our local partners. At the time there was some competing bids. There wasn't a lot of transparency into some of that but we have seen some key government changes which have changed the landscape, so-to-speak, and then with the financial situation we believe that our offer becomes even more compelling. So we're working through that as a parallel path to arbitration.

Okay. Good enough, then. Thanks a lot. I guess we'll just stay tuned.

Stay tuned, Barry. Thank you.

Our next question is from John Tumazos with John Tumazos Very Individual Research.

Thank you. Could you just review your Australian dollar hedging that remains for project execution or operations?

You've got a fair amount of disclosure if you look at the 10-Q which got filed this morning. We have a table in there which refers to our hedging and derivative exposure. If you look at it at the end of September and again we have been pretty active in October, but at the end of September we have a table which shows about $648 million hedged over the next three years. That's US dollars, at an average rate of around $0.84. And we have de minimis amount of Australian -- of New Zealand dollars hedged under a similar program.

Thank you.

Our next question is from John Doody with Gold Stock Analysis.

Good morning and thank you for the details so far. My question has to do with the forecast assumptions. Finally cash -- costs are going in your favor. And before, on oil, you had earlier said that the sensitivity of oil was $10 a barrel was equivalent to about $4 cash costs per ounce, and is that still true with your lowered oil forecast now? And also, I wonder if you could give us sensitivity with the exchange rate to the Australian dollar, particularly that you're hedged at $0.84 versus the assumption you're using now of $0.75?

On oil, with Boddington ramping up now, we're just over [3]. If you use somewhere around 3 million to 3.5 million barrels a year, that is our oil exposure. It's through very different markets with very different pricing mechanisms. But that will give you a feel for our exposure. That correlation does hang true. We have a small hedge program but it doesn't move it, so you can use that as a good rule of thumb for your sensitivities. On the Australian dollar, again, if you look on the earnings release on page one, there is a paragraph in there which talks about CAS and the sensitivity to the Australian dollar. And you'll see the sensitivity there. Again, as Boddington ramps up, that will start to increase as our Aussie dollar spend increases.

I'd just emphasize that for now it's $1 for every $10 change in oil prices. (inaudible) That's the reason that the significant number has come down from the number you mentioned and as we said in the earnings release, it's $1 per ounce per every [AUD0.10] change in the Australian range. As we get deeper into the year the range really tightens because we only have one quarter left.

And John, you'll see we used a lower oil in the table for the forecast, we used $75. What we do see is a lag and we talked about this last quarter, where we will build cost and inventory so we do have costs and inventory that will come out in the fourth quarter where we were paying $145 oil. So you don't see it immediately. There is a lag of call it six to eight weeks.

Okay. So it looks at this stage it looks like your fourth quarter cash cost per ounce are going to come in around whatever your year-to-date is, about $438. Can you confirm that?

That's about right, John.

Okay. Great. Thank you very much.

I want to thank you all for your attention today and your questions. And you can count on us to go back to work and continue executing on our plans and we look forward to talking to you in February. Thanks.

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