紐蒙特黃金公司 (NEM) 2009 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. (Operator Instructions) Now, I will turn the meeting over to Mr. John Seaberg, Vice President of Investor Relations.

Good morning, everyone, and thank you for joining us on our Q3 earnings call. Joining me on today's call are the members of our executive leadership team, who will be available for questions at the end of the presentation. As with all of our earnings calls and presentations, 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, as further described in our SEC filings, which can be found on our website at www.Newmont.com. Now I would like to turn the call over to Richard O'Brien.

Thanks, John. I realize a number of you just got off an earnings call and that it's earnings week and weeks for you guys, so we appreciate your time, attention, and interest in Newmont. Those of you with access to our simulcast presentation, I would like to begin on Slide three, with the reintroduction of our Executive Management team, including Russell Ball, our Chief Financial Officer, Alan Blank, our Executive Vice President of Legal and External Affairs, Randy Engel, Executive Vice President of Strategic Development, Brian Hill, the Company's Executive Vice President of Operations, and Guy Landsdown, our Executive Vice President of Discovery and Development.

Over the last two years, our team from our first line of operators on up through our Board of Directors, has focused on delivering on our plans and doing what we say we're going to do in an environmentally and socially responsible manner, managing our costs and responsibly driving efficiency, providing investors maximum leverage to ongoing strength in the gold price and ensuring ongoing cash flow generation and balance sheet strength so we have the resources to sustain and grow our business. I believe our record third quarter earnings are a testament to this focus, as we delivered on our business plans and expanded our operating margins, thereby offering investors significant per share leverage to the gold price. We were able to do this, thanks to the fact that Newmont eliminated all of our remaining gold hedges in July 2007, as well as the dedicated efforts of our employees around the globe, who continue to deliver on our plans in a safe, cost efficient, and environmentally and socially responsible manner.

Turning to Slide four, as a company, our ability to deliver shareholder value is centered on developing a profitable and sustainable business. We are going to achieve that and provide growth through continued generative and near mine exploration, development of our internal projects, and from time to time, value enhancing merger and acquisition activities. It's a consistent statement that we've made since I became CEO.

For the quarter, our operations delivered record quarterly consolidated revenue of more than $2 billion, record operating cash flow of more than $1 billion, and record quarterly net income of $388 million. This solid financial performance further strengthened our already strong balance sheet. As previously announced, we are also proud of achieving the first gold poured at Boddington, construction is complete and ramping up very successfully toward full production. We'll have more details on Boddington a little later. In addition, I'm proud to announce once again that Newmont was named to the Dow Jones Sustainability World Index for the third consecutive year, after having been the first gold company selected for this prestigious designation in 2007. Over time, we believe that by demonstrating industry leadership and environmental and social responsibility, we will gain competitive advantage and position our company for ongoing future success. As new gold deposits become harder to find and develop, when such deposits are discovered, we want local communities and governments to say, if anyone's going to develop this resource, we would like Newmont to do it.

I would now like to turn it over to Russell.

Thanks, Richard. I'm pleased to report, as shown on Slide five, very strong results for the third quarter that built on the first two quarters of solid performance. For the quarter, we saw approximately 1.3 million equity ounces at an averaged realized gold price of $964 an ounce, an operating cost of about $404 an ounce. Our gold cost of sales per ounce are down approximately 13% from the third quarter of 2008, as we benefited from higher buyer product credits, lower stripping and lower diesel prices. In addition, we sold 64 million equity pounds of copper, an averaged realized price of $2.80 per pound from our Batu Hijau mine in Indonesia. As a reminder, we removed the loss of our gold hedge positions in July 2007 when we settled the approximately 1.8 million ounces with gold at approximately $660 an ounce. Also during the quarter, we strengthened the balance sheet by completing our 2 billion debt offering, giving us the additional fire power to provide growth through a combination of exploration, development of our project pipeline, and acquisition initiatives that may become available, although no specific acquisitions have been currently identified. Recognizing the strength of our core asset base and our operational and financial strength and flexibility, the rating agencies have maintained our investment grade rating, which is a key component of our strategic direction for the Company.

Looking forward to Q4, with gold and copper sales are expected to be slightly higher than our Q3 numbers. You'll see we did provide some revised guidance around CAS towards the lower end, although we are seeing some pressure with FX and diesel, but we do expect another good quarter in the fourth quarter and we'll speak to the Boddington ramp up and the Batu slide in a little bit. We also have provided the Street with our early look at 2010 equity production. We're expecting equity gold production to increase in the order of 5 to 10%, based on higher production from the Boddington operation as it ramps up to full production and at Batu Hijau where we will be in the bottom of Phase five slightly offset by lower production in our maturing Nevada and Yanacocha regions. We also expect our cost applicable to sales to be approximately 5% higher next year due to higher energy and FX assumptions, although we're still finalizing our budget and we'll be discussing it in detail with our Board in early December.

Slide six illustrates the sources we could utilize to fund our organic growth opportunities, which Guy will speak to a little later. Through a combination of the available liquidity and our strong operating cash flow generation from our existing assets. Our liquidity position at the end of September is currently in excess of $5 billion and includes approximately $1.5 billion from our undrawn revolving credit facility. With our recent debt financing we have approximately $2.5 billion in equity, cash, and cash equivalents on hand. In addition, we have in our Canadian oil sands and other equity investments and other potential $1 billion in funds if needed. To be clear, we have no intention of liquidating our interest in [cost] we believe the stock is undervalued and provides us a natural hedge for approximately 20% of our diesel exposure. With rising gold prices, we expect to generate approximately $350 million on an after-tax basis in operating cash flow for every $100 move in the gold price. As you saw from our earnings release, we realized the price of about $960 an ounce with gold trading around 1,040 today. Maintaining financial strength and flexibility and continuing to generate strong cash flow, the vehicle from which we will drive long-term growth for the Company.

Slide seven highlights our expected and actual equity gold sales and cost applicable to sales for each of the regions. Across the portfolio, operations are performing at or above budget for the year, with the expectation of the approximate three-month startup delay at Boddington that Brian will provide more color on shortly. Equity gold sales in North America were higher than anticipated due to a reduction in inventory and higher lead recoveries at Carlin, Yanacocha in Peru, gold sales were higher during the third quarter due to higher grade and throughput at the gold mill. Higher grades at Jundee, a drawdown of in circuit inventory at Kalgoorlie and higher mill throughput grade and recovery at Batu helped drive equity gold sales and in the case of Batu, copper sales above budget for the Asia-Pacific region. Our costs applicable to sales for the third quarter were approximately 3% below budget, as we benefited from higher production and higher buy product credits and slightly lower stripping and diesel prices.

As shown in the equity gold sales figure, our original plans at Boddington delivering approximately 160,000 ounces during the quarter, while actual production from the mine was only 4,000 ounces due to the startup delay mentioned earlier. We recognize these ounces aren't lost, but rather will be recovered in later years. In addition, our CAS in the APEC region would have been approximately $30 per ounce lower if you factored in the lower cost ounces coming out of -- that were expected at least out of Boddington in the budget. However, with the current mine life in excess of 24 years, we are intentionally taking a thoughtful, thorough, and safety first approach to the startup of this large and complex operation. To date, we are extremely happy with the status of the ramp up, and again, Brian will fill you in on more of those details shortly.

Slide eight demonstrates are ability to deliver significant cash flow with 100% of our production unhedged, we provide investors with exposures to gold -- to the higher gold and copper prices realized during the third quarter. As mentioned earlier by Richard, revenues were in excess of 2 billion. Our costs applicable to sales were down 13% from the year-ago quarter and this combination of providing unhedged exposure to metal prices are focused on plan execution and delivery, and our continuing drive toward cost discipline allowed us to generate record operating cash flow in excess of 1 billion for the quarter.

Slide nine reiterates our ability to expand our operating margins and generate significant cash flow. During the third quarter, our operating margin grew to 58% and over the past year, our margins have increased over 40%, with the gold price having had a corresponding 11% increase over the same period. So it's one thing you get when you buy Newmont, is significant gold price exposure and significant leverage to the gold price, given our unhedged profile. Shown on the figure on the lower part of the slide, on a continuous basis we are projected to deliver the highest cash flow per share from the peer group that you see there over the next couple of years.

With that brief summary of our operating and financial highlights, I'll turn it over to Brian Hill, our EVP of Operations.

Thank you, Russell. As we turn to Slide ten, I would like to once again thank all our employees for an excellent quarter. The startup of Boddington is a very exciting time for all of us here at Newmont. On September 29, we achieved our first gold poured at Boddington and on September 30, we shipped our first copper concentrate to the port at Bunbury these are very significant milestones for Boddington and we're extremely proud of these accomplishments so far. World class Boddington operation will be a cornerstone asset for the Company by providing a large, stable production base for many years to come, with a reserve of over 20 million ounces and we continue to see upside in both near mine exploration and in the district for both gold and copper resource additions. As noted previously, we did extend the startup at Boddington during the third quarter as a result of delays in construction completion due to contractor performance and productivity, as well as experiencing some unseasonal weather through the winter periods. At the beginning of the quarter, we experienced some differential settlement in our primary crusher tunnel, which did impact the start of the project ramp up. This issue is now behind us and we are continuing to ramp up the operation and are very pleased with the early results we are seeing from the project. The early stages of production are advancing well and recoveries for gold and copper are approaching design expectations.

Earlier this month, we achieved our best daily mill throughput to date, with 60,000 tons milled, which is roughly 60% of the design capacity and we are consistently operating above 50% design throughput. The Boddington is tracking very favorably when compared with mining projects of a similar size and complexity. All the major process equipment is performing at or above expectation, with specific mention to the HPGR and the ball mills, which are performing very well. We reach design tonnage on three of the four mills and are ramping up the fourth mill as we speak. The HPGRs are performing well. And in fact, we're pleased to see we still have some capacity in this circuit as we are drawing less power from the HPGRs than anticipated. We do expect commercial production to occur sometime in the fourth quarter of this year.

Turning to Slide 11, as previously announced, we experienced a geo technical failure in the west wall of the Batu Hijau pit on September 18. As evidenced in the photograph, the slope failure encompassed a 200-meter wide area over about a 270-meter depth from the intersection of the north and south pit access ramp. Our geo technical monitoring systems provided sufficient warning to allow for all personnel and mining equipment, as well as key electrical and de-watering infrastructure to be evacuated or re-located well in advance of the slope failure. The remediation activities commenced on the 28th of September and included trimming back the upslope to restore the necessary widths to the north ramp, as well as cutting out and back filling displaced materials to provide stability the ramp. The remediation work was completed on October 10, and mining operations resumed again on October 11. During the remediation, while access to the pit was impacted, we continued to process lower great ore from the stockpiles. Due to the efforts of our team, the remediation efforts were completed safely and efficiently as possible. Previously mentioned, the impact on 2009 gold and copper production is expected to be minimal and the Company continues to expect equity gold and copper sales from the mine of between 225,000 ounces and 210 million to 230 million pounds respectively.

In operations, we've placed a real significant focus on driving business excellence throughout the Company during 2009, and that contributed to our better than projected cost and production performance. To give you an example, we have a mine to mill project at our Ahafo operation in Ghana, which has led to increased mill through put by focusing on our blast pattern design to optimize fragmentation and refining our grinding media size and charge to improving grinding efficiencies. And we expect to see further improvements both in this operation and in other words around the world. Overall, I'm very pleased with the performance of our operations team through the first nine months of the year, as essentially all operations in the portfolio have performed at or better than expectation in terms of both ounce production and cost applicable to sales.

I'm now going to turn the presentation over to Guy Lansdown, our Executive Vice President of Discovery and Development.

Thank you, Brian. Good morning. Slide 12, highlights some of our major internal projects which we are currently advancing. As we outlined at the Denver Gold Show in September, we have multiple opportunities for organic (inaudible - technical difficulty) Nevada we have a portfolio of over 18 projects, from exploration through to the advance stages of development that provide the opportunity for up to 7 million ounces of new reserves that will leverage our existing infrastructure and the technical expertise of our employees to provide additional production beginning in 2011 at a competitive price. Also in North America, at Hope Bay, we have leveraged our expanded infrastructure to complete a cutting edge framework study reinforcing our positive view of this 80 kilometer (inaudible - technical difficulty) belt. We believe the next step in the development of this district is initiation of an underground decline and drilling followed by production. We will provide more details on our plans as we progress. We are also excited about our projects in Ghana, including Ajenjua and the Ghanaian expansion project we are preparing to [color] an underground exploration deacon. We continue to advance the 7.7 million ounce Ajenjua project working closely with the government of Ghana to obtain the mining lease. Once this milestone is achieved, we are poised to advance the project quickly. Finally, in South America, we are pursuing multiple opportunities, including development of the Conga gold copper pour free district as well as advancing the sulfide resources within the Yanacocha district.

Turning to Slide 13, this provides an update on our Ajenjua project in Ghana. We received approval for our environmental impact statement earlier this year and we are working closely with the government of Ghana to obtain our mining lease. Once we reach that milestone with our advanced engineering and study work at Ajenjua we have the opportunity to advance the project quickly through stage four, after which we would make a development decision. We will build on the experience we have gained at Ahafo and leverage our current infrastructure and resources during the development and operation of Ajenjua. If we receive the mining lease and we make a development decision by mid 2010, we expect first production in late 2013 or 2014. The mine is expected to produce between 480,000 and 550,000 ounces of gold per annum for the first five years of operation, with average costs applicable to sales of between $350 and $450 per ounce. The life of mine is about 15 years, with an initial capital investment estimated between $0.7 billion and $1 billion, excluding capitalized interest. As we advance toward development, we are continuing our infill drilling program, which is about 40% complete and is showing promising results.

Turning to Slide 14, I would like to update on you our Conga project that we are advancing to gate three in our stage gate process, which will provide a feasibility decision by the end of this year. At Conga, located near our existing Yanacocha operations in Peru, we continue to pursue the opportunity to expand our production, between 650,000 and 750,000 ounces of gold, and 160 and 210 million pounds of copper per annum for the first five years of operation on 100% basis. We expect the project to start up in late 2014 or 2015, pending Peruvian approval and the development decision, with a mine life of more than 20 years. We expect our average costs applicable to sales to be 300 to $400 per ounce for gold and $0.95 to $1.25 per pound for copper during the first five years. The revenue split is approximately 50/50. Our initial capital estimate for the project excluding capitalized interest is between $2.5 billion and $3.4 billion on a 100% basis. We are leveraging our existing Yanacocha operations and taking advantage of the market conditions to reduce capital, while aggressively advancing the permitting process. We are increasing our exploration efforts in the Conga district. The next phase of the drilling program has started and we see significant long-term reserve expansion potential within this district.

Finally, I want to mention our increased focus on innovation, a traditional Newmont strength, which we are reinvigorating across our business. We are establishing a process to harness and implement new ideas globally, leveraging leading practices from across industries. Innovation sessions at each of our projects are adding tangible value in our quest to discover and develop value-adding assets more efficiently and at lower costs than our competitors. Our innovation program also targets game-changing activities. For example, new process to processes to profitably extract gold from our sulfide ores in Yanacocha. We are excited for those efforts and I will be updating on you our progress in the future.

I will now hand it back to Richard, who will provide some concluding comments.

Thanks, Guy, As well, to the rest of our team here for assisting me on the call today. I believe that in investing in Newmont, you get a couple of things. First, focus on operational execution. We deliver on what we say we're going to do. you see our production coming in as advertised, even above other than at Boddington. We're delivering on costs. We have an energized and very effective management team and I emphasize the word "team". We're working together to deliver shareholder value here. We're providing growth, year-on-year growth in production, as Russell mentioned. As Guy talked about, we have a pipeline of tangible projects that will bring real value and growth to our investors. I'm very pleased with the performance for the quarter, but even more pleased with the outlook for the Company. With that, I want to express our thanks and appreciation for you listening today. For those of you who have not invested in Newmont for a while, this is the time. So appreciate your time and attention, and we'll turn it over for questions.

(Operator Instructions).Our first question is from John Bridges with JPMorgan.

Good morning, everybody, and congratulations on the results. You've been delivering some nice improvements in the cost performance. I just wondered, Richard, how much more do you think there is there?

Well, John, as Brian mentioned, we have an ongoing effort on business excellence, and I would say we're really just getting under way and a lot of our gains over the last two years have come from a focus on delivering on current results and really relative to current budgets. I expect that Brian and his team will be providing new levels of reduced costs in the budgets over the next couple years. And while I can't put a $1 number on it today, I would tell you that I think we have a long way to go in terms of operational improvements that we can make while continuing to focus on delivering production. So I think there are still viable opportunities that will impact CAS going forward in the next several years.

Okay, great. And then with the projects that you've got in front of you, I know you're still looking at them, but are you in a position to sort of rank them as the ones you like most yet?

Well, I tell you that Ajenjua and Conga obviously are the two that rank at the very top for us because I think we're generating community support because of the good practices we've had in both of those districts. I think both of them provide nice economic returns for the company, even at lower gold prices than what we're saying today and I think with that, they continue to broaden the districts, both in Africa, well, Ghana in particular, and in Peru. So I think both of those projects rate right up at the top for us and I would say it's really a race for us to get the necessary approvals to begin development of those projects.

Okay, well done. Good luck.

Yes, thanks, John.

Our next question is from David Haughton, BMO Capital Markets. Your line is open.

Good morning, Richard and Tim. I wonder if you could remind us the status of the Batu Hijau sell down.

Yes, I'll take a crack at that. It's constantly moving target, so what I would tell you is that we currently are in negotiations with the government to continue to deliver on our promise as a result of the arbitration decision that came out in March to sell to the local government, the first 10% from 2006 and 2005 -- sorry, 7. The other interests are going to be at this point we have been told that the central government will take those up. The deadline is still November 12 for these agreements to be reached. I can tell you our team is ready, willing and able to deliver on those and we still have a little bit of negotiating going on in the various agreements that we have, and we are ready to offer the first 10% at the fixed price that the arbitration panel put out there. We're ready to do that today, and still trying to figure out the agreement with the central government. But I think we're making progress on both of those. So we stand ready to do what we have told the government, and we're just really waiting for them to get the agreements in place and to provide the funds necessary to make this transaction work.

So the ball is very much in the government's court at this stage. And I guess we'll hear an update in the next two weeks or so.

I would expect that's true. Russ, you were going to add?

Just for your information, we did provide disclosure on Page 45 and 57 of the Q that was filed late last night. And I think it was effective early this morning, so you'll see some more language in there that brings you right up to date on where we're at.

Okay, that's great. The other thing is that with these two projects that we've seen and the numbers that you provided us with, are they fresh numbers? Have they been revised on your cost and OpEx expectations based on prevailing numbers today, or are they a little bit older from that?

Yes, David, thanks for the question. This is Guy. We mentioned at the beginning of the year that we were going to sit back and look at what the current environment would do to impact our operating and capital costs. And we've worked diligently at that, indeed. They are the latest numbers that we have. We've seen very pleasing results in our capital numbers coming down on both of those projects. As well we've seen our operating costs improve compared to what we had a year ago when we were in a much more volatile market. There are the latest numbers that we're carrying.

And, David, it's still -- it's a pretty wide band, when we talk about the development -- of 2.5 to 3.4 billion in initial capital. That wide band is purposeful because we're still moving into stage four, where we'll really tighten that up with the feasibility study. At this point, Guy and his team have done a bunch of work around the range. We feel good with the range. Obviously as we move on, we'll be able to tighten that for you.

Does that suggest there's some styling options you're still considering?

Not at this stage. We've pretty much settled on the throughputs and the design, if you like, the opportunities that we would be focusing on because we're not going to let up on opportunities or seeing what we can do to improve our efficiency for execution and that's both from a schedule and a cost perspective, we're going work hard at trying to reduce both of those, the capital and the delivery timeframe. As well, we're working very closely in partnership with our operations folks on what we might do to continue to improve on our operating costs.

Sorry, David, just with respect to Conga one scale item still to be determined is potential sharing of infrastructure in the region. There are several other projects and we -- our plans that we have today do not show benefits from that and I know Guy and the team, and particularly the team down in Yanacocha and Conga are focused on to the extent we can work with other people developing mines in the area, we'll do so.

Okay. To on the project not mentioned, what's your thinking on Hope Bay at the moment?

This is Guy again. On Hope Bay, we continue to evaluate our options. Now that we've got ourselves well established in the area with infrastructure, we will continue to explore. We're looking at a 4 million to 9 million-ounce resource and our current thinking is that we would look to get a better understanding of the resource out there by driving a decline at some point in the future. We believe that's most probably the option that we would look at from there, get a good , or a better understanding of the resource and the conditions underground and then take it on into production. We're pretty early in the stage of looking at those options and we'll update you as we go along. But that's kind of the way we're headed at present, looking at starting off with a, with an underground decline much the same as we're doing at

And with that underground decline would be designed to potentially be a production decline?

Absolutely, yes, that's what we have in mind at both Subika and at Hope Bay. They form a number of, or present a number of opportunities for us. They help us get down there and understand what's down there from a geo technical and geo hydro logical perspective. It's a better platform from which to explore and we're expecting that pending success, we can go straight on into production from those declines.

Thank you very much. That concludes my questions.

Thanks, David.

(Operator Instructions) Our next question is from Patrick Chidley, Barnard, Jacobs, Mellet, your line is open.

Good morning, everybody. Just a couple of questions on, in particular in Australia, Jundee seems to be producing some good results continuing, is that operation going to continue with the sort of current rates into next year? Is that one of the expectations?

Thanks, Patrick, it's Brian here. We are expecting to see Jundee continue to perform. One of the main, the main issues at Jundee mines very high grade, very narrow, very narrow veins, which you pretty well need to get on the vein to ultimately get your reserve grade that you're going to mine. So we do see a number of swings and roundabouts, where we're in a period where being on left side, we're actually seeing some significant positive reconciliation. But, that does have the potential to turn on us, but, we are still expecting a good year next year out of Jundee and looking at some additional potential extensions at the operation as well.

You've had quite a bit of exploration success that you talked about I think earlier this year.

We have. It's been a real success story for relatively smaller underground operation.

Yes. Good. And couple of questions on Ahafo recovery Ahafo went down. I understand you did do some stockpile reprocessing and just wondering why you were doing that. Is that sort of taking advantage of gold prices, or was there some other reason?

No, it was really around some of the sequencing issues and some, and some dewatering issues that we had to do in the pit, and so it was really an issue of having to get into some stockpile while we finished off some dewatering, dewatering activities to get to the bottom of the pit exposed again so we could get back to mining fresh ore.

So you presumably you got through the wet season and now there should be higher grades and higher recoveries in the next quarter, this quarter?

Yes, absolutely, and we're still projecting Ahafo to perform as expected for the year.

Okay, and (inaudible) just thought you -- are you going to go through a little bit of detail on that? Can you give us some updates on what the plan is and how long it will take to get into the ore?

Yes, Patrick, this is Guy. We've got a decline plant for the early part of next year. It's a project which currently sits in stage two, so we've got requests out for proposals. We're looking to award a contract shortly and as I said, similar to Hope Bay, we would get down as soon as we can, get an understanding of what's down there again from a resource and a geo technical perspective and continue to move on into production with positive results.

You have a resource there already. What would be the average grade of the underground that you are considering there?

We are looking at around grades, from current drilling and our NRM. Sorry, Patrick. On the order of 5 to 7-gram a ton, but again, early days, still got to go down and confirm that, which is the reason for the decline.

Right, okay. One more question about new projects and the volume, mentioned 18 projects in Nevada. Can you give us some highlights to get, or potentially 7 million new ounce reserves?

Yes, we're looking at up to 7 million ounces. Some of the bigger projects that are out there are Gold Quarry, West Wall, which we're drilling as we speak. Turf is a very exciting one, which is an expansion to our (inaudible) mine. Immigrant is another one of the bigger ones and then there are a number of expansions to and new underground operations and pits, the number we're looking at -- what's exciting for us is to bring them into production in the near-term.

Some of those, even as near as 2011?

Other than next year or so we would be looking at the opportunity to bring some of the projects into operation. So we have 18 projects and they comprised early stage projects right -- advanced project.

Right. Have a couple of joint ventures in Nevada that could, add some incremental production. Can you maybe give us some more color on those?

Patrick, Russ, you're referencing Hollister?

No, no, not at all. Actually steamed be a couple of other ones that have cropped up. Sand Man would be one of them I guess and some of the others.

Yes, in our plan is just the Turquoise Ridge joint venture with Barrick and there's a little bit of toll milling we're going for Great Basin, but at the end of the day, they just don't move the needle on roughly a 2 million ounce there in Nevada, and the folks there are continuing to look at other opportunities.

The other projects are all ours.

Okay, all right. Thanks.

And I would just say that Nevada's a great example of what consistent delivery on plans can do for us. These guys have had an opportunity to look more out into the future, identify these projects as helping to offset some of what people believe to be, and it clearly is a mature region for us, but these projects will help reenergize that region, provide growth in the region, and I think continue to spread costs and hopefully reduce our costs over a larger base of operations as we go forward.

Right, okay. Excellent. Thanks very much, guys.

Our next question is from Heather Douglas from Thomas Weisel. Your line is open.

Thank you. Good morning, everyone. I have two questions. The first is can you review what the permitting steps will be for -- it's been a while since you've had to -- how far along are you already?

Yes, Heather, this is Guy. We are currently preparing for the gate three. And as part of that, we are putting together our permit application. We that and the process at the moment we could expect anywhere between a year and 18 months to go through that process. We are working as diligently as we can to put it together and then to expedite it.

Okay. And then at the beginning, Russell was talking about the sort of three-pronged growth strategy and of course you always mention acquisitions and maybe I'll put a twist on the usual question. What kind of acquisitions would you not consider as sort of stage of development, or are there any regions that are no go regions--

Hi, Heather, it's Randy. Really there are no no-go regions for us. What we try to do is build acquisition or opportunities because our average life for assets, they can improve our cost base on margin on leverage, but really if it's something that is encouraging in those areas, those asset characteristics first, that's what we look at. Then we'll take a look at the balance of political risks and other risks.

Do you have a preferred stage of development? Would you like it to have something that already has the feasibility on it, or Hope Bay was quite early stage and we know it's--

We like it all near our existing mines. We like it now and really not to be, not to dismiss that, but we've got a preference obviously for those opportunities that are closer to production or in production.

Okay, and if I can slip in a third question, what is the definition of commercial production that you'll be using to bring Boddington into commercial production?

Heather, Russ. It's actually 70% of design, which if you look at the numbers, we were roughly at 60%, so that's 70,000 tons a day on an extended basis. My personal view, and having chatted to Brian and his team, we'll be there sometime towards the middle of next month or the end of next month. Again, the final capital estimate is going to be for final capital cost will be a function of when we declare commercial production. But as you well know, that's largely moving operating costs into capital and vice versa. The spend is essentially done as far as a work going on in the field, but, yes, sometime in the fourth quarter, again, they have had a nice run, but as Brian mentioned, we have to get line 4 up and see the project perform for a couple-week period realistically. That's our definition some, where around 70. There are some different constraints that we use that meet the accounting definition, but that's really the key one, 70% for an extended period.

Does that mean for say first quarter 2010 we should be prepared for high costs, because let's say you have 70% of throughput, but likely 100% of costs?

Yes, and you raise a good point. We do have a 12-month ramp up curve. As Brian said, we're tracking right in line with certainly our experience at Batu Hijau and we'll continue to ramp up. So what you'll see in 2010 is not a full year of the million ounce a year, but having said that, while you will see some higher costs on the denominator basis, we're seeing higher copper in the concentrate and certainly at $3 or wherever we're going to be next year, copper, that significant -- that helps keep the costs in line with our original estimates. So we haven't seen anything that we believe puts those, the guidance out there at risk.

Okay, good. Thank you.

Our next question is from Leo Larkin, Standard & Poor's. Your line is open.

Good morning. Is there any guidance for copper equity sales in 2010? You gave guidance for gold.

No, we didn't put any out. We're still working through our budget. As I said, it will go to the board in early December. The issue we're dealing with is the geo technical slip at Batu and just finalizing what that impact is going to be. I will say, and we've said this to the Street, we will be in the bottom of phase five next year, which will be a good year for us. As you know, the mine does go through some extended stripping and then some high grade production out of the bottom of the pit. We will be in the bottom of the pit, so it will be a good year, but we haven't finalized the numbers. That's why we didn't give you the copper the site is still working through the mine plans for the year.

Okay, thanks very much.

Okay. Once again, I want to thank the management team and all of our employees for delivery of a great quarter and I want to thank all of you for taking time out of your busy reporting week to listen to our call. So with that, have a great day. Thanks.

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