紐蒙特黃金公司 (NEM) 2009 Q4 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, we will conduct a question and answer session. (Operator Instructions). Today's conference is being recorded. If you have any objections, please disconnect at this time.

I would now like to turn the call over to Mr. John Seaberg, Vice President, Investor Relations. Sir, you may begin.

Thank you, operator, and good morning, everybody. Thanks for joining us on our Q4 and year-end 2009 earnings call. Joining me today are the members of our executive leadership team, who will be available for questions at the end of the presentation.

Before we get started, as usual, 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.

And now I will turn the call over to Richard O'Brien, President and CEO.

Thanks, John.

I would like to start today's call by revisiting Newmont's strategic priorities outlined on slide three, for those of you with access to our simulcast presentation. In 2009, we continued to execute well in our operation and drive significant improvement in our financial performance. As we look forward, we believe that successfully executing on the key benchmarks that we set out for the Company at the beginning of each year will lead to increased value for our shareholders. Less execution risk should imply a higher value for our portfolio of operations and projects. We continue to work tirelessly to achieve our strategic priorities every year, and we're pleased that 2009, to a significant degree, solidified our foundation of doing what we say we will do.

Our continuous focus on disciplined planning and operational and business excellence enabled us again to deliver on our annual operational guidance for 2009, just as we done 2008. These operating results, along with a robust gold price environment, led to record financial performance, including the generation of almost $3 billion in operating cash flow, which Russell will speak to later. Now that we have reached the construction completion and commercial milestones at our Boddington Project in Australia, we are focusing our efforts on advancing our next generation of projects, 30 million to 40 million targeted ounces of development opportunities of which approximately 20 million ounces are in proven and probable reserves at this year-end with the remainder being at earlier stages of definition. Guy will review a number of these opportunities a little later in the presentation. Importantly the strength of our balance sheet, combined with expected future cash flow, should provide the funding we need to develop these world-class mining projects. And finally, we consistently aim to improve our safety record and commitment to environmental stewardship and social responsibility.

That said, 2009 was a somber year for Newmont as we mourn the loss of four co-workers who died as a result of fatal acts in our operations. Because of our relentless commitment to creating the safest possible work environment, we recognize that fatalities are simply unacceptable. We continue to beef that we must get to a zero injury, not just zero fatality workplace. Safe production is the bottom line here at Newmont.

2009 did offer some high points in our environmental, social, and community relations efforts. We completed and published the findings from our unprecedented community relations review and brought together a global workshop held in Washington, DC late in the year for many of the participants to hear feedback from the communities who had a chance to review the CRR. However, our work doesn't stop with just a review. We're in the process of developing standards and pushing them throughout our organization to build better relationships and more sustainable relationships with our host communities. We're also pleased to be recognized as an industry leader in sustainability for the third consecutive year by our selection to the Dow Jones Sustainability World Index. We also recognize the challenges facing the world related to climate change. As such we continue to look for ways to make our operations more efficient and take an industry leading role on this critical issue.

Turning to 2009 performance highlights on slide four, we had an excellent year, setting records for revenue, adjusted net income, and operating cash flow. In 2009, Newmont generated $7.7 billion in revenue, a 26% increase over 2008. We also generated record operating cash flow of $2.9 billion, a 109% increase over 2008. And our adjusted net income increased to $1.4 billion or $2.79 per share, a 60% improvement on the year. Our equity gold sales reached 5.3 million ounces at costs applicable to sales of $417 per ounce, both within our guidance announced at the beginning of 2009. While realized gold prices grew 12%, our margin on gold increased 28%, demonstrating our ability deliver strong financial leverage to the gold price. We also sold 226 million pounds of copper at costs applicable to sales of $0.64 per pound.

In addition to record financial results, a combination of excellent 2009 exploration results and the acquisition of Anglo's one-third interest in Boddington resulted in equity gold reserves of 92 million ounces, an 8% increase over 2008. This marks the highest level for our equity gold reserve since 2006, and equity copper reserves of 9.1 billion pounds, a 17% increase over last year. We are excited about these results as this forms the foundation for future growth to our existing operations and our strong pipeline of projects. 2009 marks a significant milestone in Newmont's transformation and positions to us further emerge as a leader in the mining industry.

Turning to slide five and focusing on our fourth quarter results, in particular, our operations generated consolidated revenue of $2.5 billion, a 90% increase over the fourth quarter of 2008. Net operating cash flow was approximately $1 billion, a 323% increase over 2008. Our net adjusted income rose 379% to $561 million, or $1.14 per share, an improvement of 338% over last year. Equity gold sales for the quarter were 1.5 million ounces at costs applicable to sales of $413 per ounce. This quarter's costs applicable to sales were 7% lower than the fourth quarter of 2008 thanks to a continuous focus on cost control and higher production. These operating results, paired with a 38% realized gold price increase led to a 94% increase in our gold operating margin. Copper, as in the third quarter, also contributed significantly to our success. In the fourth quarter of 2009 we sold 72 million equity pounds of copper at $3.24 per pound with costs applicable to sales of $0.64 per pound.

I want to acknowledge the dedication and commitment of our employees worldwide. We had a superb 2009. Our total equity gold sales for the year focusing on slide nine were 5.3 million ounces -- sorry, slide six -- falling in the center of the range for our original outlook. Our full-year costs applicable to sales of $417 per ounce also comes in the lower half of the original outlook range of $400 to $440. Due to the delayed completion of Boddington, our consolidated capital expenditures were $1.8 billion, above our original outlook range and above our third quarter outlook update of $1.6 billion to $1.7 billion. As we mentioned, the delayed start-up of Boddington pushed this number higher as we continue to capitalize pre-commercial production and interest costs until we achieve commercial production in mid-November.

I will now ask Brian Hill, Executive Vice President of Operations, to take us through our operating details on a regional level.

Thank you, Richard.

Slide seven illustrates our regional performance as compared to our outlook for 2009. We're proud that across our entire portfolio our focus on operational execution produced equity gold sales and costs applicable to sales results in line with our original expectations, which speaks to the hard work, alignment, and dedication of our employees in each one of our regions. In Nevada, we sold more than two million ounces of gold, just slightly ahead of our outlook due to higher underground tons mined at Leeville and Deep Post and higher leech recovery at Carlin North and Twin Creeks. Costs applicable to sales were $521 an ounce, lower than our expectations due to higher production, fewer tons mined, partially offset by higher royalties, higher net proceeds taxes, and higher underground mining costs.

At our operations in Australia and New Zealand, we sold 1.3 million equity ounces of gold, below our original guidance of 1.5 million to 1.6 million ounces due to the delayed start-up at Boddington. Gold sales at Jundee again came in higher than expected as we continue to have higher ore grade at this operation, which was offset by lower than anticipated sales at Tanami, due to lower ore grade, and at Wahee as a result of an electrical fire in the mill earlier in the year. Costs applicable to sales of $508 per ounce were above our original expectations, but were in line with our third quarter updated outlook.

At Yanacocha in Peru, equity gold sales reached 1.1 million ounces, beating our outlook due to higher mill throughput, ore grade and recovery. Costs applicable to sales were $311 per ounce, just outside the top end of our original expectation of $290 to $310 per ounce as higher gold prices resulted in higher royalty and workers' participation costs, partially offset by higher mill production and byproduct credits. Our Ahafo operation in Ghana sold 546,000 equity ounces of gold, well above our expectations due to higher ore grade and throughput and a drawdown of finished goods inventory. Ahafo's costs applicable to sales were $445 per ounce, better than expected due to lower mining costs as a result of lower than expected waste material mined and lower power costs.

Finally, equity gold sales at Batu Hijau in Indonesia were 239,000 ounces at costs applicable to sales of $214 per ounce, which was lower than expected due to lower diesel and mining costs and higher coke product allocation of costs to copper. Across the portfolio we're very pleased with our operational performance and continue to look for innovative ways to improve upon these results.

Now, I will turned over to Russell Ball, our CFO to highlight some of the more interesting financial results for the year.

Thanks, Brian.

On slide eight, you will see our gold operating margin for 2009 grew 28% on an average realized gold price increase of 12%, demonstrating our ability to deliver gold price leverage to the bottom line. Our 2009 gold operating margin of 57% is an all-time, and this does not take into account any benefits from our copper sales which as Richard mentioned previously, grew significantly in 2009 and we look forward to an even stronger 2010. As you can see from this chart, historically our margins were in the 45% to 50% range, not too dissimilar from the rest of the industry. Now, with the continuing focus on cost control and full exposure to rising gold, copper, and silver prices, we are seeing substantial earnings and operating cash flow growth. For the 2005 to 2009 time frame, gold margins increased by 175%, on an average realized gold price increase of 122%.

On slide nine, you can see our operating cash flows in absolute dollar terms. 2009 was a record year as we generated almost $3 billion of operating cash flow, an increase of 109% from 2008. Looking at the chart on the right side of this slide, you can see that we have an extremely strong balance sheet with over $3 billion in cash and cash equivalents. We have approximately $1.6 billion available under our revolving credit facility, plus approximately $1 billion in marketable securities. The $6 billion of available liquidity positions us well for funding internal growth through the development of our project pipeline and potentially through acquisitions.

Now I will turn it over to Guy Lansdown, our EVP for Discovery and Development, to talk about our 2009 exploration results, proven and probable reserves, and advanced projects.

Thank you, Russell.

Looking at slide ten, as we mentioned earlier, our proven and probable gold reserves grew 8% in 2009 to approximately 92 million equity ounces, the highest reserve level since 2006. At the same time, our copper reserves grew 17% to 9.1 billion equity pounds, our highest level on record. Our exploration programs alone replaced over 90% of our gold production depletion. Gold addition came from all regions, with notable new ounces at the Gold Quarry pit in Nevada, Boddington in Australia, underground operations across Australia and New Zealand, and at Ahafo in Ghana. In addition to our 2009 equity copper reserves being the highest on record for Newmont, our equity copper NRM is at the highest level since 2003, largely due to the Boddington acquisition completed in January of 2009 and a greater economic interest in Batu Hijau in Indonesia. These increases combined with our general exploration opportunities will support future sustainability and growth in each of our operating regions. We have focused our exploration efforts across the full breadth of the pipeline. We will continue to strengthen our reserve base as we have budgeted $190 million to $220 million for exploration in 2010, a 10% increase from last year, 75% of which has been budgeted for near mine opportunities.

Turning to slide 11, we are excited about these two major projects in our African region. The Akyem project, which is up for a final development decision and full funding approval in the third quarter of this year, and our Subika expansion opportunity near our existing Ahafo operation. With respect to Akyem, as mentioned earlier this year, we recently received the mining lease from the Ghanan government have commenced the necessary crop compensation and relocation work. We are committed to implementing industry leading environmental and socially responsible practices, as we bring this project in in late 2013 to early 2014. We are extremely excited about this project as we have come up with some innovative ways to reduce the project's capital costs and increase the return on capital. Current initial capital estimates are between $700 million and $1 billion to produce between 480,000 and 550,000 ounces of gold per year. The average costs applicable to sales are between $350 and $450 per ounce. We're aggressively moving this project forward and plan to spend approximately $100 million this year, 20 10, on basic and detailed project engineering, land access, and building our owner's team. As mentioned, we will be looking at making a go-forward decision in third quarter of this year.

Looking at th Subika expansion project, we have identified a target of approximately seven million to nine million equity ounces of gold, of which approximately three million ounces are in proven and probable reserves, and the remainder is at earlier stages of definition, including underground operations. We began construction of an exploration decline in February of this year and are conducting simultaneous exploration drilling from both the surface and underground to further delineate this deposit. The Subika project will be our first underground operation in Ghana and demonstrates the potential in and around our existing Ahafo operation.

Slide 12 highlights two other major projects, Conga in Peru and Hope Bay in Canada. At Conga in 2010, we are advancing the permitting process and basic and detailed engineering with a gate for full funding decision targeted for the end of the fourth quarter depending on permitting. Conga is a large copper/gold core free with consolidated reserves with approximately 12 million ounces of gold and over three billion pounds of copper. First production is currently anticipated for late 2014 to 2015 with average annual production of 650,000 to 750,000 ounces of gold and 160 million to 210 million pounds of copper at competitive operating costs. The current initial capital estimate stands at between $2.5 million and $3.4 billion on a 100% basis. Buenaventura is our partner on this project, as with the Yanacocha, Newmont earns 51.35%. We are very excited about this project, both because it has an expected mine life in excess of 20 years and because there is tremendous exploration potential in the district.

We are also excited about our vision for the advancement of our Hope Bay project in Canada. Positive 2009 drilling and regional exploration results, combined with a favorable review from our Jundee operations team in Australia, have reinforced our positive view of gold resource potential across the eighty kilometer Greenstone Belt. We are advancing development with an underground focus to be initiated with a decline at the Doris North deposit. Although still in the early stages, we are energized about this opportunity, and we now have an experienced team and key contractors in place. With near-term development plans and district exploration for years to come, Hope Bay is a significant asset within our portfolio. We have $140 million to $170 million budgeted for 2010, primarily for exploration, infrastructure and to advance the decline. We look forward to updating you on Hope Bay's progress throughout the year.

I will turn it over to Richard.

Looking at our 2010 outlook on slide 13, equity gold production is expected to be between 5.3 million and 5.5 million equity ounces driven by higher production from the Asia Pacific region as a result of the ramp-up of Boddington to full production, partially offset by lower production from Nevada in North America and at Yanacocha in South America as a result of increased stripping and lower ore grades. Total costs applicable to sales are expected to be between $450 and $480 per ounce, including the impacts of accounting for Boddington on a co-product basis. Total costs applicable to sales would be expected to be between $440 and $470 per ounce, including the impacts of accounting for Boddington on a byproduct basis. Costs applicable to sales are up in 2010 from 2009 as a result of lower production at Yanacocha and lower production at Nevada. By the way, Boddington on a stand-alone basis would be about $295 to $315 an ounce on a byproduct basis and $375 to $395 per ounce on a co-product basis.

Our copper production in 2010 is expected to be 350 million to 380 million pounds at costs applicable to sales of $0.85 to $0.95 per pound driven by higher production of Batu Hijau and the ramp up of slightly higher cost production at Boddington. We also expect to spend on a consolidated basis $1.4 million to $1.6 million in capital expenditures in 2010. This figure includes the capital related to aggressively advancing the development of our projects which Guy spoke to earlier, and there is a chart in our earnings release which goes into detail on the spending on those projects.

Moving to slide 14, at the time of our third quarter earnings call, we announced that we believed our 2010 production would be up 5% to 10% from 2009 levels. Our outlook as presented today is at the it bottom of that previous guidance and I wanted to describe the major factors affecting the shift to the lower end of that range. As mentioned earlier, the biggest incremental contributor to our production profile in 2010 is Boddington, which we anticipate will produce 800,000 to 875,000 equity gold ounces in 2010. And that's slightly below our targeted one million ounce run rate as we continue to ramp up to full production throughout 2010.

As know, our Yanacocha operation continues to mature since commercial operation began there in 1993, and we expect its production in 2010 to decline to between 750,000 and 810,000 equity gold ounces. This represents a decline of approximately 300,000 ounces from 2009. The primary reasons for the decline in production is lower leech placement and lower mill ore grade. Looking forward, we expect South America's production to remain near 2010 levels.

Turning to Nevada, our production outlook for 2010 is 1.6 million to 1.7 million equity gold ounces, approximately 17% lower than our 2009 production due to lower production from the Carlin operations and the closure of Deep Post, partially offset by increased production at Leeville. The lower production at Carlin is due to a geo-technical event we experienced in late December at Gold Quarry, limiting access to ore that was originally scheduled to be mined in 2010 and 2011. Following a series of geo-technical mine planning and/or blending analysis conducted in January and February of this year, up to approximately 150,000 equity ounces of gold production are expected to be deferred from Gold Quarry in 2010 with potential additional ounces deferred in 2011. We continue to study opportunities to safely accelerate the production of the ounces currently scheduled to be produced in 2012 and 2013. Of course, this event will not likely affect our life of mine plans for Gold Quarry, but it does defer the production of ounces to 2012-2013 time frame. In total, we're expecting 2010 equity gold production to be between 5.3 million and 5.5 million ounces, which represents production growth potential up of to 5%. Turning to copper, we expect to produce between 350 million and 380 million equity. That's up approximately 60% from 2009 levels. This is driven by the ramp-up of Boddington, as well as an assumed economic interest of 52.44% in Batu Hijau.

Looking at slide 15, our 2010 costs applicable to sales outlook compared to the 2009 actual figure, higher costs are primarily driven by lower production at Yanacocha and Nevada, as well as a change in accounting for Boddington, from a byproduct credit basis to co-product accounting. Boddington's low-cost production will benefit our 2010 costs applicable to sales as well, bringing the total costs applicable to sales for the year to between $450 and $480 per ounce, as I mentioned earlier. Our costs applicable to sales for copper will be slightly higher in 2010 compared to 2009 as a result of more costs being allocated to copper at Batu Hijau, as well as co-product accounting treatment at Boddington. As previously mentioned our consolidated capital expenditures outlook for 2010 is $1.4 billion to $1.6 billion with 30% invested in each of the North America and Asia Pacific regions and the remaining 40% at other locations. Approximately 60% of the 2010 capital budget is allocated to sustaining investments, with the remaining 40% allocated to project development, including the development of a Akyem in Ghana, Conga in Peru, and Hope Bay in Canada. We'll continue to provide additional information about our projects throughout the year.

In closing, our achievements in 2009 provide Newmont a strong and enduring foundation for strong operating results and project development capacity for decades to come. We've demonstrated that we have the ability to consistently deliver on our plans and do what we say we're going to do. We've also demonstrated ability to deliver significant margin growth and leverage to an increasing gold price. Our existing production base and focus on responsibly containing our costs have given us strong operating cash flow generation and a strong balance sheet to fund the development of our next generation of major gold and copper projects.

As we embark on our next major mine development campaign, Newmont is well-positioned to take advantage of ongoing strength in metal prices. We are inspired by Newmont's ongoing transformation as the changes we have implemented begin to yield noteworthy results for our shareholders and stakeholders. And we're not done yet. As I stated at the beginning of this presentation, we are all committed to doing what it takes to make Newmont the most valued and respected mining company through industry leading performance. Lastly, I again want to express my gratitude to our employees for delivering a record year and for the foundation they are creating to ensure the future success of our Company.

With that I would like to thank all of you for listening and open the call for questions.

(Operator Instructions). John Bridges, your line is open.

Thank you. Good morning, Richard.

Hey, John.

Hi. Just wanted to get a sense of the status of go-ahead on these projects. You're talking about CapEx as if you are going ahead with these things, but you're going put them to the Board during the year, I would guess. Is some of the spending provisional on the Board go-ahead?

No, John, really where we are is we have authorization to move forward on these projects, but in our disciplined stage gate approach we're really trying to signal to you that in case of Conga, we don't have a permit yet. In the case of the development at Akyem we're still moving forward with land access to make sure we finalize that as well as completing the final feasibility for the project. So that's the status. We're moving forward on both of these. We are careful, though, to make sure that we have milestones, so that we can keep these projects on track and keep them in front of the Board as well as our shareholders.

That's helpful. Then as a follow-up, Hope Bay is probably a little bit more difficult for us to understand than the two big projects. I wondered if could you give us a little bit more of a sense as to what you hope to develop there?

Let me turn it the over to Guy, and he can give you a current update on what we're doing at Hope Bay.

Good morning, John.

Good morning.

John what we have is a revitalized team at Hope Bay. We have just built up a team of folks who are very experienced in the Arctic, and we have drawn on the resources in Jundee, where we have a geological formation which is similar to Hope Bay, which has given us confirmation and the ability to start knotting out a more detailed development plan for the project. what we plan on doing is following on from the positive exploration results is to start driving a decline.

We'd like to understand the resource better, understand what the extraction costs are, set up the infrastructure to continue exploring and developing, and from that point on, with positive results, our plan is to go in a phased approach to -- with regard to putting in a processing facility, perhaps a smaller plant down the road, but our first step is to get with a decline this year and set up infrastructure. So we're very excited about the project and both exploration results that we've got, not only from the drill bit, but also from our regional framework study.

I would just add to that John, I think we have an exceptional opportunity at Hope Bay, and it's an opportunity with some risk, and that risk we can only really refine our understanding of that by driving a decline and moving forward, but remember, we have a large district here which we own 100% of the rights to. We're beginning to understand that district more and more, and I think Guy and Cindy Williams and the team have put together a really good plan for us to step out, and I hope that when we meet with analysts in May of this year, we'll have a better opportunity to talk with you in detail.

Is that right? Is it May? When are we meeting in Boston? We'll give you further disclosure on what's going on at Hope Bay, but I would say as Guy said, I think we're re-energized about the opportunities there.

So the game plan is to get your hands around the one project, then you cab go look at the other targets?

I think the idea is to get in, the only way we're going to really refine this is to get underground and started to follow these narrow, high-grade veins. I think that's why we're leaning more and more on our global knowledge, particularly on the people out of Jundee, who as you know, the last couple of years, you've heard Russell refer to Jundee as "the little engine that could." It just keeps going. We're hoping those people will help us here as well.

Okay, well done, guys, thank you.

David Haughton, your line is open.

Yes. Good morning and thank you. Following on from that Hope Bay discussion, I noticed in the slides that the capital expenditure was $140 million to $170 million, and yet in the document that we're looking at, it was about half that level. Just wondering what that difference might be and whether it's attributable to exploration versus CapEx.?

That's it exactly. We, actually, in total were looking at $200 million or so in both infrastructure, which will relate to pre-ordering equipment and driving the decline to actually begin this effort as well as continued exploration and the development expenses related to that.

And I'm presuming with the decline that that's on the Doris ore body?

Yes, that is correct, David. That's our intention to start the decline in the Doris North area where we've got a better understanding of the resource, as Richard said, of the total $140 million to $170 million, half of that is for capital infrastructure in the decline. The remainder is for study work and exploration.

But just switching now to Gold Quarry, had noted the geo-technical issue confronted there. Just wondering where the deferred production impacts the Nevada royalty or whether it's outside of that footprint.

David this is Brian. Good morning. At this point in time, we expect that there will be some impact on the royalty. We haven't got a final number in terms of quantifying what that might be, and when we do, we'll be moving forward and talking with our royalty holders about what that impact might be.

Thanks, Brian. And finally, on Batu Hijau, just a little bit confused about your expression of ownership at 52.44%, because after sell-down it ought to have gone to something in the order of 31.5%. Wonder if you could talk me through that logic?

David, hi; it's Russ Ball. What we have in Indonesia is an 35.44 equity interest; that's at the end of 2009. We have a 17% economic interest in our Indonesian partner who we loaned a significant amount to address some of his issues.

So what we have is a 35% economic -- equity interest, plus 17% based on the economics, which will accrue to us. The loan is entirely -- the only recourse we have as to future production. And so that is the way we've accounted it. This is similar to the accounting, Dave, will you remember from 2000 to roughly 2007 when we had a similar loan facility outstanding with our partner.

David, it doesn't show up this way, but I think if you view it as a carried interest, as Russ said, we had earlier, it's almost identical. The accounting is somewhat different, but the economic results are very near to that picking up that additional 17%.

I appreciate it. Thanks for your time. That 17% would work its way down to zero as the foregone revenue would make up that difference of the loan?

David, we'll stay at 17 until the loan, including a 14% interest in accrued interest on that loan is fully repaid.

Do you have an expectation when that might be, Russ?

At these metal prices, sometime in the next couple years.

Okay. Thank you very much. That concludes my questions.

(Operator Instructions). Barry Cooper, your line is open.

Yes, just wondering if you could flush out a little bit more; you indicated that Boddington didn't live up to your expectations. Just how is it going, and are your expectations, were they modified at all for 2010?

Yes, I'd say when we say it didn't lead up to our expectations, I think it's solely the fact that we had about a four month delay in terms of getting the project to construction completion. I'd say we did better than expected in terms of ramping up to commercial production, getting the project from construction completion very rapidly into mid-November, surpassing that 65% plus level of operating.

I will tell you, over the last couple months, from a mill operations standpoint, things are going very well. We have run the mill at or near capacity on several days, and I think the team is really executing very well, so in that respect, it's actually going probably beyond our expectations. Back into the mine, I think we still have some work to do from the pit to the primary crusher. I think we'll continue to optimize this facility over the next couple years to ensure that we've got right balance between mine production all the way through to refining both copper and gold, and I think, overall, we feel good about where we are on Boddington, emphasizing that the purchase of the Anglo interest was very economic for us. I think owning 100% of that with current operations, we feel very good about that. I think the potential in that district will the lead us to beyond the 20 plus year mine life that we have.

So at this point, I would say it goes very well for us, and we're going to be happy to have some of you guys down to take a look at it, because I think when you see the facility and how operations are going, you'll see this as a pretty amazing facility, and we're actually doing a really great job there and compliments to the team around the world for really supporting ramping that operation up as quickly as we did.

I know did it beat my expectations there a little bit, so congratulations. What is the grade reconciliation that you are seeing so far? Are you seeing any surprises there? And what should we ultimately look for in terms of the recovery?

Barry, it's Brian Hill. I will answer that for you. It's still pretty early days with respect to grade reconciliation, but what we're seeing so far is we're down a little bit on the gold grade reconciliation, but we are up on the copper grade reconciliation. From a recovery perspective, we are actually performing a little bit better than the low 80s that we had on gold and copper recovery in the mill. The other nice pleasant surprise we're seeing, is we're also seeing little higher concentrate grades than we had expected; from a metallurgical performance perspective, we're seeing results better that are a little bit better than expected.

Right. Maybe just remind me, because I know Doris had a resource before, and you have obviously done an awful lot of work. What's the resources attributable to Doris now?

Barry this is Guy. At the moment we've got a resource of up to about 300,000 ounces on the Doris North area, specifically, and we continue to explore around it and below it, so we will determine more as we get exploration results throughout the year.

The grade of that would be, roughly?

The grade for that is in the 20 to 25 gram per ton range.

Right, okay. And then just one final question. Throughout the release you talk about, and kudos to you for giving us some guidance out to 2011 and 2012. I just want to ask a question so that I understand it correctly, you used the term production should be near 2010 levels, or the word near is used quite frequently. Near to me would mean less than 5% change. Is that what you would interpret the near to be as well?

Nice test, Barry. I think "near" for us means given all the vagaries of mining we're going to be pretty close to where we are today in both in those areas where we use the word near.

Okay, good enough.

Okay.

Patrick Chidley your line is open.

Congratulations on a great quarter.

Thanks, Patrick.

Wanted to actually look at some of the new project that you've obviously spent a bit of time talking about. In particular, Subika underground. I thought I saw a resource of 7 million to 9 million equity (inaudible). Has that changed from last year, and is it because you had tremendous exploration success there?

Patrick this is Guy. We have to give you the split, about 3 million ounces in the pit in the form of a lay-back. There's about 4.5 million ounces in NRM which is split between a pit and underground. We're still trying to work out -- the optimal set up for our purpose is underground the remainder is pre-NRM material, but to answer your question, yes, we have improved as a result of our drilling progress throughout 2009.

And that total number, that's for just this particular area?

Yes, that's just for the Subika pit and the surrounds.

Right. How deep underground does that take you in terms of what you're seeing there in the resource?

Well, at the moment, we've drilled down to about 500 meters, but the intent of that decline is to get down deeper, not only to understand the resource and the extraction cost, but to set ourselves up to explore further and deeper.

Right. In terms of underground, how are you modeling the ore body in terms of dimensions you might expect and average grades?

That's the process we're going through at the moment. It's in stage 2 of the study, so we're trying to optimize the size of the pit versus what the underground is going to look like.

Right. So would you -- basically, would you anticipate any underground operation as being quite a bulk mining situation as opposed to narrow vein sort of mining?

That's exactly the case, Patrick, but we are looking at different options at the moment, Patrick. The again, it's stage two in our capital effectiveness process, pretty early on. Difficult to say exactly how we're going to extract the material.

Right, right. And then at Akyem, I think it was touched upon earlier, but I think you mentioned the CapEx number of $700 million to $1 billion, then separately you mentioned that you'll be excited because you found some improvements to the CapEx. Is that range including the improvements, or is that the improvements maybe pushing those numbers lower?

That's our previous number, Patrick, as we go through the developmental stage four, we would anticipate incorporating our reductions, if there are any we'd hope to tighten up the range a bit. But we're not only looking at improving the capital, we're also looking at improving operating costs, so we're trying to add to the bottom line from a value perspective.

Right. And at Akyem, if you do have a construction decision in Q3 this year, when would production be expected? What's the sort of time horizon?

At the present we're targeting late 2013, but that could float into 2014. The critical part for us is going to be relocation and land access. So we'll get a better feel for that through this phase of the project.

Have the power issues there been sorted out in terms of the reliability and quality of power that you get?

This is Richard. I think, Patrick, the answer to that is yes, and the reasons are varied, but at this point, we have not really had issues with respect to the power at Ahafo, and a lot of that is hydro availability has gone up.

But in this time most importantly there has been a significant discovery of oil and gas off the shore of Ghana, and under the rules that Ghana uses with respect to the UN, they will be not allowed to flare that gas, bringing it on board. There's permitting going on for gas plants so we actually see additional infrastructure investment in electricity generation in Ghana. So I think the confluence of that timing and the production at Akyem will line up well. We will have backup diesel facilities there, but hopefully we won't need to use them.

Excellent. Just a final one on Boddington. You touched upon some exploration success you're getting. Could you give us an idea of what scope that would be in terms of size potential or grades?

Patrick, this is Guy. We are currently focusing our exploration efforts on the northeast part of the pit, where we are hopeful that we will get some material that's of higher grade than current, and from our initial exploration results we're pretty hopeful that it will turn out that way.

I would just add to that, I think in the larger district, one of the things the team down there has been able to do is get some work on the tenements, which, as you know if you've been in Australia, is an important thing to be able to get completed with, with bauxite and some of the other issues in the area for us to proceed with exploration outside of the existing operating pit and I think those are plans you will see the benefit of over the next couple years.

Okay, great. Encouraging. Thanks very much.

Thank you, Patrick.

(Operator Instructions). [Lane] Atwell, your line is open.

Good morning and congratulations on a good quarter. I realize there's a limit to what you can say but can you review your M&A strategy, how motivated you are, what kind of targets, what kind of timing we could expect?

Our aim is to dominate the world. What I would say is that, and I can turn this over to Randy in a minute, but as a broad-brush look, we understand that to build this business we have to both develop our own projects, we have to continue to explore on the early end and Guy mentioned about $200 million in exploration on our own stuff, both green field and near mine, but we also know we have to do acquisitions from time to time.

We are going to continue to be value oriented. It's not as if we haven't look. Last year we completed $1 billion dollar acquisition pretty quietly at a very good price when we got the Boddington deal. I think going forward Randy and his team the rest of the management team, we're committed to building the business. At some point we will do a deal. Randy, you want to talk about what it might look like?

I think we would just look for the usual characteristics that just about all of our peers are looking for. We're looking to enhance our grade. We're looking to extend our average mine life. We're certainly looking to do those in more favorable jurisdictions. You see our last two transactions were done in AAA-rated jurisdictions like Hope Bay, like Boddington, but we are willing go into places we haven't gone before.

And we look for synergies, and we look to do that on an accretive basis. So it's a fairly common checklist. We recognize we won't hit all of those on any given transaction. We're willing to take some risks.

Just to be clear, I was kidding about the world domination, for those of you on the record.

Second question, if I could have a follow-up, what are your thoughts on hedging? I could understand why you might not want to hedge gold, but how about diesel or currencies?

Hi, this is Russ. We do have an active Aussie-dollar hedging project that's nicely in the money. We do a little bit on diesel and energy and have looked at a number of other options.

I guess at a high level of strategy is trying to manage the volatility around costs, so we're looking to not time the market as much as we're looking to remove the peaks and fill the valleys, so you won't see us taking any huge one-directional bets, but over time we think adds value as we continue to de-lever on what he we say we're going de-lever.

I assume there's no change, that's your strategy and you're sticking with it, and you're not more excited or less excited about that.

I think Russ' team is really focused on a disciplined execution plan, which means that every once in awhile we might do something other than just reach out a few years in Australia if we see something that we think is opportunistic, but it won't be a big bet. I think legging in is how we'll do this; and clearly we're looking at hedging the input costs.

We will not hedge our outputs relative to gold and copper, and I think, importantly, there is plenty of information on our hedging in the 10-K document, which was filed last night or this morning, and just there's a lot of disclosure there around what we're doing and why, and you can look at it and see it's fairly consistent.

Thank you.

Additionally, I would say that we do continue to hold our interest in Canadian Oil Sands and as we've talked about before, while it provides a current cash distribution stream, importantly, the notional value goes up and down, the market value really depending on what the price of oil is. So we have a little bit of an internal hedge on that as well.

Thank you.

Brian MacArthur, your line is open.

Good morning. Not beat the accounting for Batu Hijau to death here, but can you confirm the $287 million in the fourth quarter going out to buy subsidiary shares, I assume there's nothing else in there, that's the $287 million advanced to your Indonesian partner, and secondly, I realize you're now giving production on everything on 52.44% basis. With your CapEx numbers, are they coming in at 52.44%, and do you actually fund the partners' capital first and recover it, or how does that all work?

Brian, Russ. So the $287 was the advance at 12/30/09. Subsequent to year end we've had a small additional advance that was part of a delayed payment. In addition to that we have had a dividend distribution so that alone sits roughly at $260 million today. As far as capital, there's significant cash flow coming out of Indonesia, so external financing at least for 2010 and into '11 is not an issue. So the project self-funds, if you want.

The capital numbers themselves in our presentation are all consolidated.

Great. Thank you very much. That helps.

And now I'd like to turn the call over to Richard O'Brien.

Thank you very much for your participation in the call today, and if you have have questions or want to follow up, please don't hesitate to call John or Randy or anybody on the team here, and we look forward to seeing you in the near future. Thanks.

This concludes today's conference call. Please disconnect at this time.