紐蒙特黃金公司 (NEM) 2009 Q2 法說會逐字稿

Welcome, thank you for all standing by. At this time, I would like to remind parties that your lines are on a listen-only mode until the question-and-answer session (Operator instructions). Today's call is being recorded. If you have any objections, you may disconnect at this time.

I will now turn the meeting over to Richard O'Brien, President and CEO. Thank you, sir, you may begin.

Thank you very much. Good morning, and thank you for joining us on our conference call to discuss Newmont's financial results the second quarter of 2009. With me in the room today are several members of our management team who will be available for questions at the end of the presentation. And I'll ask them to identify themselves when they do so. As with our previous earnings calls, I need to remind you that we will discussing forward-looking information involving a number of risks, certain of which are unique to our industry as further described in our SEC filings which can be found on our website at www.newmont.com. I just ask that adding continued increase in providing increased timely visible information to our business. Our 10-Q was filed last night and I just wanted to acknowledge the hard work of our accounting financial tax staff in getting that prepared and filed. So, thanks to all of you, and some of you are probably on the phone.

For those of you with access to our simulcast presentation, I would like start with some comments on slide three. As we look at the second quarter highlights, I am pleased to report solid operating and financial results as a result of our ongoing focus on operational and project execution. Our second quarter performance builds on results from the first and provides a base from which we can deliver on our operating plans for 2009. Completing the successful transitioning of items that comprise our construction developed to startup, which is a major focus of our efforts in this first half of 2009. During the second quarter, the drive plant of Boddington was transitioned and is now operational. Commissioning the wet plant was initiated and is continuing. While the schedule for this work has flipped by approximately one month, we're expecting first concentrate to be produced in August, followed by first gold production from (inaudible). With the startup of the first two mills at Boddington underway, we continue to anticipate a 12 month ramp up schedule towards full production from all four mills. I'll provide more details on Boddington later in the presentation.

In terms of our second quarter financial and operating results, we delivered equity gold sales of approximately 1.2 million ounces at an average realized price of $915 per ounce and cost applicable to sales of of $423 per ounce, which is down about 4% from the prior year's quarter. Also during the quarter we sold 47 million pounds of copper at an averaged realize price of $2.17 per pound and our cost applicable to sales of $0.58 per pound from our Batu Hijau mine in Indonesia. We have faced considerable progress in regards to our divestiture obligation to Batu Hijau, which I'll cover later. We continue to believe that a primary driver of long-term value for Newmont is cash flow generation.

During the quarter, we generated cash flow from continuing operations of $503 million or $1.03 per share. Our adjusted net income for the quarter was $213 million or $0.43 per share compared to $0.50 per share for the second quarter of 2008. This reduction is primarily driven by lower-realized copper prices and a significantly higher tax rate, partially offset by higher sales volume and lower unit costs. Net income from continuing operations on GAAP basis was $171 million or $0.35 per share compared with GAAP net income of $270 million or $0.60 per share for the second quarter of 2008. The primary driver of the difference was the $0.28 per share income tax spending recorded in a year-ago quarter as well as the items I just mentioned related to adjusted net income. As we return to slide four, our equity gold sales and costs applicable to sales by region, we are performing in line with our expectations. In Nevada, we sold 415,000 ounces, slightly below expectations, primarily due to lower throughput and (inaudible) and from lower production and (inaudible) due to the suspension of mining activities following a ground failure which curtailed production for most of April. Costs applicable to sales were lower than expected at $549 per ounce due to higher by-product credits and lower milling costs, partially offset by lower gold sales. By not coaching a higher leach count production as well as higher grades and throughput at the gold mill resulted in higher than expected gold sales of 274,000 ounces. Costs applicable to sales was not a (inaudible) $323 per ounce were in line with expectations as the benefits from higher gold sales were offset by higher royalties and worker's participation cost, resulting from higher realized gold prices and lower by-product credits.

In our Australia/New Zealand region, equity gold sales of 283,000 ounces were also above expectations due to higher grades and recoveries at Dundee, partially offset by lower production of logging in New Zealand following an electrical fire in the mill in early May that held the production for the remainder of the quarter. We expect mill repairs to be completed in August. Higher gold sales during the second quarter favorably impacted costs applicable to sales a flat $500 per ounce. It Batu Hijau in Indonesia, equity gold sales of 48,000 ounces were in line with expectations while costs applicable to gold sales of $229 per ounce were lower than expected due to lower allocation of cost to gold as a result of higher copper prices and co-product accounting. Equity gold sales and costs applicable to sales at Ahafo in Ghana was 132,000 ounces at $428 per ounce were in line with expectations. Equity gold sales in our other category are primarily from Honduras, Mexico, which contributed 31,000 ounces at costs applicable sales of $398 per ounce. As noted in our press release this morning and in our 10-Q, we sold our 88% interest in Kori Kollo in Bolivia to a company controlled by our long-time Bolivian partner. We'll assume all obligation to the operation in exchange for royalties on future production. As part of the transaction, we will establish a reclamation trust fund in the amount of approximately $14 million, the proceeds of which will be made available only to pay for closure and reclamation costs when operations eventually cease.

As mentioned on our first quarter call, our operating performance for 2009 is skewed for the last six months of the year, primarily due to the ramp up of Boddington fine sequencing in Yanacocha and will shut down in Nevada during the second quarter for planned maintenance activity. And the traditional production benefit from the dry (inaudible) at Batu Hijau in the third and the fourth quarter. Again, I would like to reiterate that while we recognize that quarterly fluctuation will occur we continue to drive our businesses towards meeting and exceeding our annual guidance. Slide five demonstrates our ability to deliver cash flow. Newmont, as the world's largest unhedged gold producer, provides our investors with exposure to the gold price. During the second quarter, we generated over $1.6 billion in revenues with over 85% attributable to gold sales. This exposure to gold price, coupled with our drive toward cost discipline lead to a continuing focus on plan execution and delivery, allowed us to generate $503 million in operating cash flow and continuing operations during the second quarter. Turning to slide six, we revised our outlook for both gold sales and copper expenditures for 2009. We've updated our equity gold sales outlook to 5.2 million to 5.4 million ounces, from 5.2 million to 5.5 million ounces in consideration of operating results from six month's of actual production and Boddington's July startup.

For 2009, our outlook for consolidated capital expenditures has been updated from $1.5 billion to $1.7 billion, from $1.4 billion to $1.6 billion in consideration of Boddington's startup that was partially offset by lower than expected capital expenditures across the rest of the portfolio. For the year, our outlook for cost of goods sales remain unchanged at between $400 to $440 per ounce with our current forecast assuming oil prices at $70 per barrel and our Australian exchange rate at 0.75. As shown on slide seven, we continue to focus on delivering on delivering our plans in a safe and environmentally sound manner and in doing what we say we are going to do. This is the cornerstone to our business and allows us to deliver long-term value to our stakeholders. With the the successful turnover to dry plants operations and wet plants commissioning advancing rapidly, we have successfully started to trend this environment from project construction to startup.

Another key deliverable for us is to fulfill our obligation at Batu Hijau as outlined in the arbitration decision delivered in March of this year. I'm happy to report that we have made significant progress on all of our arbitration obligations. I'll provide further detail on this in a few minutes. We continue to grow and establish our disciplined approach after reevaluating and pursuing the best available internal and external investment opportunities to sustain our business with an ongoing focus on Conga in Peru, Hope Bay, Canada and the Akyem in Ghana. Finally, we remain committed to improving our operational and business efficiencies throughout the organization with the ongoing goal of delivering superior leverage to gold prices and improving our financial return. As shown on slide eight, a stage star for Boddington is underway. The dry plant, which includes the primary crusher, conveyer coarse ore feeders and high-pressure grinding rolls has been successfully turned over to our operating personnel. With the delay in the commission of the wet plant, we have lowered our expectation for 2009 gold sales from Boddington, primarily as a result of lower productivity associated in the slowdown in the contractor labor market as well as wetter than expected weather conditions. With the introduction of waste rock to the plant, the ramp-up phase of Boddington is commenced. We are expecting concentrate to be produced in August, followed by gold from leaching, and we'll still anticipating a 12-month ramp-up schedule for full production.

I know many of our employees from around the world listen to our earnings calls, and I want each of you to know how proud you should be that we are bringing up the largest gold-mining operation in Australia, and it has been a combined effort of our team from around the world, and I want to recognize each and every one of the people at Boddington who have really worked in difficult conditions over the last several months to bring this plant up, and I know everyone down there is looking for the successful completion and transition into full operation, so I want to complement the construction operating teams who have really been slaving away down there to get this done and it is getting done in style. Slide nine provides additional details on the current outlook for Boddington. On 100% basis, capital costs for the construction of Boddington are expected to be between $2.8 billion and $2.9 billion. This compares to the previous outlook of $2.6 billion to $2.9 billion. The increase, really, is just -- in the bottom end is just because we are closer to startup, and we have more information available and one month later than previously planned.

For the first full five years of production, we still expect annual gold sales of approximately 1 million ounces per year as reviewed on a previous slide, as a result of the change up in startup, we're updating our outlook for gold sales for 2009 for Boddington to between 200,000 and 300,000 ounces from the previous range of 375,000 to 450,000 ounces. We continue to anticipate cost applicable to sales net of by-product credits to be less than $300 per ounce for the first full five years of production. As of the end of 2008, gold reserves at Boddington were approximately 20 million ounces. During the second quarter following the receipt of Australian and South African regulatory approvals, we completed the acquisition of the remaining 33.33% interest in Boddington from AngloGold. (inaudible) with the closing, we incurred acquisition fees of approximately $59 million during the second quarter, primarily associated with Australian (inaudible). As the valuation data to transaction was January 1, 2009, $182 million was repaid in cash to Anglo during the second quarter their share of year to date capital expenditures.

Slide 10 provides a brief update on our Conga project (inaudible). During 2009, we continue to reevaluate project costs under current economic conditions. We are also evaluating synergies associated with leveraging neccessary infrastructure and facilities within our existing operations (inaudible) as well as its neighboring projects in the region. To recap, the project currently has equity reserves of over 6 million ounces and approximately 1.7 billion pound of copper. During a visit to our exploration camp early this year, I had the opportunity to meet many of the residents and leaders of the community surrounding Necessary infrastructure and facilities within our existing operations of (indiscernible) as well as the neighboring project in the region. To recap the project currently has equity reserves of 6 million ounces and approximately -- to (indiscernible) had the opportunity to meet any m of the residents and leaders of the community surrounding Conga. I was impressed by their strong desire to see this project move forward.

Turning to slide 11and our Akyem project in Ghana, we are working with the government to obtain the necessary mining permit following the environmental permit we received earlier this year. We are currently evaluating development alternatives that focus on leveraging our existing infrastructure and personnel. During 2009, we're completing a infill drilling program at Akyem to confirm the resource of over 15,000 meters of drilling completed today. Slide 12 provides an update on Hope Bay. We just completed a regional framework study that has identified 22 (inaudible) targets across 80 kilometers greenstone belt. We're refining priority targets with additional field work including a ground based geophysics for drilled targeting. We anticipate first pass drill testing on the highest priority targets by the end of this year. Given the existing deposits in exploration upside of the district, we're also focusing on evaluating a range of project development scenarios to best develop the potential of this district.. These include large open pit to smaller underground and hybrid scenarios with a rage of potential mill throughputs and locations. We have also completed 35,000 meters of an expanded 45,000 to 55,000 meter development drill program centered around our known deposits of Madrid, Boston, and Doris. Results of this program are anticipated in third and fourth quarters of this year. All of our exploration programs are being completed safely and efficiently based on our 2008 expanded infrastructure investments at Hope Bay. So in summary, we've moving three projects along. They are all moving along very nicely, and we expect that several of them will progress through our stage gate through the balance of the year, and we will be giving more information as they do so.

Turning to Slide 13, as mentioned on our prior earnings call, the arbitration ruled on the Batu Hijau divestiture issue on March 31 of this year. The arbitration ruling outlined multiple obligations to be implemented by the foreign shareholders of PTN&T, ourselves and our partners Sumitomo, by the end of September. I'm very pleased to report that we have made significant progress on our obligations. We reimbursed the government of Indonesia $1.7 million for costs associated with the arbitration. We have insured the release of pledges on 31% of PTN&T shares previously held by the senior lenders. In addition, the 2006 and 2007 shares have been reoffered to the local and regional governments for $109 million for 3% and $282 million for 7%, respectively. Earlier this month, to a very collaborative effort between the government of Indonesia, Sumitomo and ourselves, we agreed on a valuation Batu Hijau of $3.526 billion. This corresponds to a price of approximately $494 million for th total 14% for the 2008 and 2009 divestiture shares. We have since reoffered the 7% 2008 divestiture shares to the government of Indonesia, and we're now prepared to transfer the 2006, 2007, 2008 and the 2009 shares as we move forward.

To summarize the status of the divestiture obligations to the government, we have reached agreement on the price of the 2008 shares. We're now awaiting the national and regional and local governments to designate buyers for these buyers to actually pay for their respective divestiture shares. And as noted on this slide, the government of Indonesia must transfer the shares. They have to approve those transfers, and we do expect that they will work cooperatively with us as we continue to move forward. Throughout the divestiture process, we have been committed to working with the Indonesian government so the divestiture provisions, as defined in the contract of work can be honored. As we have always said, we are willing to live up to our obligations under the contract of work, and we just need to know to whom we need to sell these shares and at this point, we have done everything that we need to do and we are waiting for the government of Indonesia now to provide us with additional instructions. So we appreciate our relationship with the government of Indonesia and the fact that we are able to reach agreement on several of these matters in a very timely fashion. So we now hope to focus of the long-term success of Batu Hijau while maintaining the same high operating and safety standards that we have adhered to since that operation began over 10 years ago.

Finally, on slide 14, with everything that we do, making sure that all of our operations perform as expected, we continue to focus on our environmental and social responsibility and obligations as well as insuring that each of our employees goes home uninsured at the end of the day, our first priority. And with that, I'd like to thank you all for listening and open the call for questions.

(Operator Instructions). Our first question is from John Bridges, JPMorgan. Your line is open.

Hi, Richard, everybody. I wanted to say that there's quite a lot of noise on the line. I don't know where that is coming from. Just wanted to say, congratulations on the progress at Yanacocha. This high level of production, is this something which we can expect to carry on into subsequent years, or is that just a one-off deal?

John, let me just say, first, we're not really giving estimates out for -- beyond the end of this year. We did have a good production quarter at Yanacocha, but I think -- let me turn it over to Brian. He can just talk a little bit about how our gold mill is operating and why production is up a little bit this quarter. So, Brian?

Thanks, Richard. John, good morning. We had a good start to the gold mill and it does continue to outperform. It is performing enough for a 5% to 10% range on throughput, a little higher than expected, and we have been experienced some higher ore grades through the mill. It is not a trend, as Richard reiterated, that we are expecting to see on a longer term. It's really just more a function of sequencing and where we are in the various pits at the mine.

Great, thank you. As a follow-up, you are further down the line with investigating your projects, Conga, Akyem, Hope Bay. What do you think, Richard, now in terms of build or buy in this crazy market that we're participating in?

John, great question, build or buy. I think the answer -- we use the big 64 (inaudible) because I think it really is important. As we've talked about before that we build this business through a combination of exploration, project development and selective M&A, and I think we continue to look in to the marketplace to see if there are available opportunities. There have been several out there, none of which have really interested us to date, but I guarantee we work hard every day to see if there is something out there that we should avail ourselves of, and we hope that as we continue to perform on the operating side, that our share price reflects the success of that and we enable ourselves to do more over time in that marketplace.

Thank you, and I look forward to seeing Boddington up and running at year end and the results that will come out of that. Thank you.

Thank you, John, appreciate that.

Our next question is from Heather Douglas, Thomas Weisel Partners, you line is open.

Hi, good morning. I have a question about Boddington. I was wondering if you could give us a little guidance on how you expect the throughput to ramp up over the next 12 months to 18 months and the same with recoveries. And the other question with Boddington, can you remind us what the average copper production will be in the first five years?

Let me turn that question over Guy Landsdown and Tom McCulley, who is our project manager down at the bottom (inaudible).

Hi, Heather. This is Guy. Heather, as far as the ramp up goes, we are currently -- there's a process that we're undertaking, and the first is (inaudible). We have dry plants up and running as Richard said. So the next goal is to get the wet plant up and running, and it is a 12 months ramp up here to get up to full production, so we're looking around a year from now we'd expect the plant to be up and running at full capacity.

Is it a straight line, though? I don't think it is, but in Q1 10 could we expect 60% throughput achievable at that point, or?

No, it's not a straight line, Heather, it's kind of a stiff curve because we've got four (inaudible). We start up sequentially, and we'd expect to ramp up gradually over that period, but it won'd be a straight line.

At this point, Heather, I would say -- it's Richard -- we're probably estimating commercial production later in the year, potentially in the November timeframe. So you think about these things start to ramp up, that's sort of our expectation at the moment.

Okay. And then what about on the recovery side?

On the recovery side, Heather, to answer your question, we're expecting around 30,000 ton a year of copper.

Okay. 30,000 tons of copper.

That's for the first five years.

Okay. And metallurgical recoveries, does it ramp up as well? Should we expect them to be quite weak initially?

It would be lower initially, and the ramp up could take account of that. The ramp up is focused on gold production, copper production, but your answer, it will initially not be as in line with ultimate expectations.

And I do have a final question. Overall, can you tell us what your third quarter guidance for production and costs will be?

Yes, we actually don't give guidance by quarter for our production. I think if you take the balance of the year, you could assume that we have higher production at Batu Hijau as we move further into the year. You could also assuming that Boddington, of course, will have higher production as we move further into the year. Probably really no real changes in Nevada at the rate of operation, although the second quarter is generally lower due to mill maintenance. And Yanacocha will be experiencing wetter weather during the year, so we probably will see lower production at Yanacocha as we move the year down. Q4 likely to be greater than Q3 when you look at it that way. Take the balance of the year, (inaudible) we are going to hit our estimates, because we are, then you can find of get to that.

On side four, you showed us what your expectations for Q2, but of course, we didn't know what your expectations for Q2 --

Right, but we do. (laughter) We manage very closely to our expectations. We give you an expectation for the year.

Okay. Thank you, have a good day.

(Operator Instructions) . Our next question is from Patrick Chidley from Bernard, Jacobs, Mellet. Your line

Hi, everybody. Just a couple of questions. Just quickly on Nevada, so you have upgraded your forecast for the year by about 100,00 ounces, and just wondering if you could give more detail on why that is the case (inaudible) why you do that?

Sorry, Patrick, I didn't exactly hear the question, but I think your question is why we changed our production estimate by 100,000 ounces on the high end?

Yes.

(Inaudible) being able to move Nevada production up, as you'll note in our summary financial outlook, and we brought the -- or the top end down by 100,000 just because of delay (inaudible). So in Nevada, we're expecting a little more production from the deep post than we would have originally expected during the year. That operation continues to go well. We still have access to the portals, so that is going to go longer than we had planned, and that's probably one of the bigger reasons for why we are where we are in Nevada.

Mostly then deep post then, high production than deep post.

Post and a little bit around some other operations in Nevada. It's a larger operation -- I'm just giving you the primary reason we post, but their operations in Nevada, they are pushing up their production slightly as we move in to the second half.

Okay. And that's taking in to account the fact that Midas has been affected, and --

Yes, Midas actually was -- Midas was already back into operations. I mentioned we we shut down for most of April, but beginning of May, it has come back on, no issues, things continue to go, and Brian was just telling me no operational performance in Nevada is expected to continue to be optimized over the balance of the year, and that will help as well. So we've got a number of things going on in Nevada. As you know, Patrick it's a complicated operation. There are a number of things that go into the -- both those are things that could happen and both positive and negative. As we look towards the balance of the year, we have more positive things than we were expecting, and that's the primary reason.

Okay, thanks. Quick on exploration, I thought I noticed that you increased the budget for exploration slightly, and it was quite a lot more than last quarter. Is there any new projects going on there, or this just a reevaluation of the current -- the ongoing projects you identified at the beginning of the year.

Patrick, this is Guy. Patrick, we have increased our guidance slightly, and that is because of focus on Hope Bay. We're putting more dollars in to exploration. We're increasing our targeted midrange from about 35,000 to about 55,000 mills for the year.

Okay. That's helpful. Okay. Thanks very much.

Thanks, Patrick.

Thank you. Our next question is from Barry Cooper, CIBC, your line is open.

Yes, good day, everyone. Just wondering, the September deadline for activity at Batu Hijau there, what happens if that passes?

Barry, that's a good question, and it's one that I wish I could give you a definitive answer to. But what I will tell you is that so far, the government and Newmont have both been working, knowing that there is a deadline out there. I think that everybody realizes there is a deadline out there, and I see lots of support to get things done on this side of the deadline. Anything can happen, though, and I think we continue to look at what might happen but at this point, I'll tell you both the government and Newmont as well as our partner Sumitomo are really focused on hitting the deadline. If something does happen, we'll update you then as to what options are available. I hope that we don't reach that. That's my ultimate desire here. I don't like hope as a business plan, so that's why we work very closely with the government to try to effectuate this in a timely manner.

So no mechanism for a resolution then in the event of an overrun of the time date?

Actually, that's not what I said. What I said is we're working to try to avoid that. I think that there are any number of potential places where we could go for either judicial redress, or if need be, back to the arbitration panel. I don't believe that that's going to be necessary. As I said, I see a high level of cooperation here. We're not spending our time trying ready for that event. We're really trying to spend our time making sure that we get this deal done with the government. But as you point out, this is a very valuable asset to Newmont. It's things don't go the direction that they need to be they time frame, we will, of course, consider every option necessary to protect that asset. But that is a backup strategy, though, as opposed to our frontal attack at this point in working closely with the government to make sure we do what they want us to do.

Okay. So let's assume things get resolved and September 30 deadlines are met, the 24% transfer of ownership, I assume your guidance does not include any of that transfer of ownership in terms of loss of balances in our guidance numbers; is that correct?

That is correct. Our guidance doesn't assume the production change, which of course would be a reduction. It also doesn't assume any of the capital or cash that will come in to the company as a result of that sale.

Right. And then I guess your guidance also includes non-commercial production coming from Boddington; is that correct?

Yes. That's true.

Okay. And then based on a couple of other things, I thought that usually July/August was good times for Batu Hijau in the sense that that was the dry period where you got down to the bottom of the pit and whatnot. Is that not taking place this year? Because you implied earlier that Q4 was likely to be better than Q3.

Barry, this is Brian. This year in Batu, we're not down in the bottom of the pit. We were in the bottom of the pit last year in Phase 4, and we're expected to be back in the bottom of the pit next year in Phase 5. So this is the year where we see the lower copper and lower gold grades, because we are higher up in the profile.

Okay, good. And then final question, now that Boddington is built, what's the biggest risk that you see in terms of completing it as I would describe, which basically means that it is up and working?

Barry this is Guy. Barry, our big challenge and our big focus will be ramping it up as quick as possible.

Yes, I think with four mills, I think this will take some time to get up and running smoothly. But one thing I would say is that -- the question that I was asked along the way here a number of times around the technical complexity of the HPGRs, the high pressure grinding rolls, that's probably the number one question, and Guy, you might just talk a little bit about our experience on those at the moment. It's very early, but let's just talk about it.

Yes, sure Barry. The dry plant has been running -- has been in operations since May, so we have got a good bit of a chance to see how that performs. We are pretty comfortable with the way that the major equipment has operated. We had waste material run through the entire plant and when we had to look at our major equipment, although (inaudible) we are pretty comfortable with how they were performing. And as Richard said, the HPGRs were one of the biggest risk items. We do have Sierra Verde in Peru, which is run with the same flow sheet and the same HPGRs, and they have had some pretty good experience there. They have ramped up reasonably well. We have also got a good relationship with our vendor, (inaudible), and they are set up to support our maintenance needs which are going to be the big ticket item, the big area focus for us, and they specifically set up a shop for this project. And Tom, do you want too comment any more on HPGRs? Tom McCulley, our project director is with us and fresh out of the fields from this exciting time for us.

I think Guy and Richard summed it up well. But we do see the dry plant brushing very well, and the initial stuff that's gone through the mill has come out very well So, very encouraged by that. As Guy said, it's early days, but went through the plant really well.

We have a very long conveyor system out there, it's been running for some time. We've had a few issues initially, but we have had plenty of times to fix those up. So having the dry plant running and operational and really shaking down is going to -- I think it increases the confidence level that we have. With respect to moving into the wet plant, we acknowledge it is still in process as we move in to ramp up and into commercial production, but we keep ticking away those areas that might have been risks and I think with that, hopefully Barry we'll have you down there next year, and you can walk in front of this thing and see it producing ore and going all the way through to gold production.

Right. Just a clarification there so I understand. So you say you've put material through there, but I would assume that that material that you are putting through are from the upper parts of the ore body which being oxidized and whatnot, I wouldn't expect to have anywhere near the hardness of the material that will form the bulk of the ore body there. Have you indeed been able to put through some of the harder ore?

That's a great question.

That's a real good question, and you are right on that. Above the existing ore body was oxide material, or the separate line at least, but we have indeed put hard waste ore through the pump. We haven't put any of the softer oxide material through. And that's the material that we are talking about that is working pretty well. Obviously, it was waste material. We don't want to be putting any ore through. But we have got ore on the stockpile and ready to run through, and we we are hoping to introduce that shortly.

So the work index on that would be typical for what you would expect for the bulk of the ore body, them I guess.

Barry, it's actually a little bit harder. Some of the waste rock is actually harder than some of the ore, that's actually where we're actually pretty satisfied with the crushing circuit.

Okay. Good enough. That's all my questions.

Thanks, Barry.

Thank you. (Operator Instructions). Our next question is from David Haughton from BMO. Your line is open.

Yes, good morning, and thank you. Richard, you'd mentioned in the commentary, and I missed the detail, that there's some sort of catchup payment in AngloGold in relation to Boddington.

Yes, I did. I'll have Russ talk about that.

Hey David. Yes, that transaction took effect January 1, so as we went through and closed, they were funding their share, which essentially we refunded approximately $200 million. There was some working capital adjustment, but those numbers are included in our capital in the second quarter that catch up and the full cost for the full year at 100%.

Yes, we knew going in to the year that we weren't exactly sure of the date, but we knew we were going to be responsible for 100% of the capital expenditures for 2009, so those were in our estimates. And what we've done now is with the closing this is really the payment of that accrued capital.

Okay. So when I have a look at the CapEx for the first six months at Boddington, it's $684 million. Is that netting out the $200 million that you are expecting back from AngloGold?

No, that includes Anglo's roughly $200 million and our capital to date. You should think about that at roughly 400 odd per (inaudible) and another 200 round numbers for the Anglo third, effective January 1.

All right. So you are getting that money back.

No. Actually, we're not getting the money back. We're paying them back.

I see.

Because our overshift really became effective January 1. As we have been spending capital during the year, they have been paying their share because we weren't sure when the date was going to close. Now we closed. Now we're paying them back. So what Russ is saying is 200 in capital in this quarter actually should be over the full six months if you want to look how Boddington has ramped up during the year.

I understand now. And how much is left to be spent for completion of Boddington?

What was the question?

How much is left to be spent?

Oh.

It is probably in the order of $150 million to $200 million. Yes, approximately $200 million.

And David, this is Russ. Just to be clear, the final capital number will be a function of commercial production which as Richard said, we estimate to take place in -- late in the fourth quarter. Commercial production is roughly at 75% of boilerplate, so we had this question earlier, it's not 100%. So we'll see when that occurs. The longer that date goes, the more operating cost will shift to capital. It's not incremental spend, but it's just under the accounting provisions we would be required to capitalize on certain of the mining costs, the G&A and other costs we're incurring after that commercial production date.

Offset by whatever revenue you gain?

Correct.

Also I noticed in one of your slides that the Boddington life is extended from 20 years to 24 years. Is that the anticipation of a reserve upgrade?

That's based on our latest reserve estimate, which is up at the end of 2008, early 2009.

Okay. Very good. And just looking now -- changing topics for some new development projects that you have highlighted in the commentary. In the case of Minas Conga and also Hope Bay, what do you expect to spend in those two projects in 2009? 2009.

At Hope Bay, we're looking at spending of the order of $60 million, and at Conga, we're looking at the order of $30 million, $23 million.

Is that total for the year, or remaining?

That's for the year, total for the year.

For both projects.

Yes, for both projects.

All right. Well, thank you very much.

Thank you.

Our next question is from (inaudible) from Morgan Stanley. Your line is open.

Hi, thanks. Good morning. Two questions. First at Boddington, would your copper production start up pretty much at the same as gold production? And then second, if you have any updates on any projects related to longer term outlook for Yanacocha. I know you talked about Conga, but in the last conference call, you mentioned some other project like sulphide and (inaudible) deposit. Any updates on that will be appreciated. Thank you.

On the Boddington production, the copper does come out together with the gold in the concentrate that we produce. The are two production streams, but one is a gold dore and the other the copper/gold concentrate. So, they will be produced alternately.

With respect to other projects in and around the Yanacocha, we continue to do some drilling around the sulphide project, and that's really related to continued development, the technical path that would be necessary to process that. So we continue to spend some money on that, and we continue to look at that over a longer term opportunity base. With respect to (inaudible), as we continually said, (inaudible) is in our NRM, not in our reserve base, and the reason is because we will continue to know that we will have to get community and government support to be able to bring that in. What I can tell you is it is an important deposit for us, but not so important that we want to override the local social and political environment around (inaudible). So we hope that it will come over time, but it will only come with and when we get the right level of social acceptance. So I don't want to give you the impression that it's out there in the very near term. It's not. And then finally, around Conga, we continue to refine the plan for development, and there are a number of other companies in the area who are also looking at similar copper, gold torprey, and we are in the process of trying to figure out how we can, in effect, reduce the level of total infrastructure payment, so that's one of the things we continue to try to optimize with others.

Fair enough. Thank you.

Thank you. And with that, we appreciate everyone's attention and making time for us today. Thanks a lot.