紐蒙特黃金公司 (NEM) 2010 Q1 法說會逐字稿

Welcome, and thank you for standing by. At this time all participants are in a listen-only mode until the question-and-answer session of today's conference. (Operator Instructions). I would like to inform all parties this call 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 of Investor Relations. You may begin, sir.

Good morning and thank you for joining us on our first quarter earnings call. With me today are the members of the executive leadership team who will be available for questions at the end of the presentation.

Before we begin, I would like to refer you to our cautionary statement on slide two, as 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.

I will turn it over to Richard O'Brien, our President and Chief Executive Officer.

Thanks, John, and good morning everyone. For those of you with access to our webcast presentation, I would like to begin on slide three. With our average realized gold price up 22% to $1,106 per ounce and our average realized copper price up 97% to $3.33 per pound from the first quarter of 2009, our first quarter operating cash flow increased from $381 million to $728 million. Our revenues also rose, increasing from $1.5 billion to $2.2 billion. While our adjusted net income improved from $199 million to $408 million. As these financial results clearly indicate we continue to offer investors substantial gold and copper price leverage.

As shown on slide four we also continue to meet our operating targets. During the first quarter this year we produced 1.3 million equity ounces of gold and 90 million equity pounds of copper. With costs applicable to sales of $480 per ounce of gold and $0.78 per pound of copper. For the year we continue to expect gold costs applicable to sales of between $450 to $480 per ounce. In 2010 we're experiencing pressures relative to our full year 2009 CAS of $417 per ounce. Primarily driven by lower production volumes in Nevada, Peru and Ghana. And as a function of higher costs, 100 round production in Nevada and higher mill production at Yanacocha. The lower cost production from Boddington should offset some of these operating costs as we ramp up to full production towards the end of this year. Additionally, the remaining third of the year's increase over last year in CAS is a result of higher gold prices and an unfavorable Australian dollar exchange rate. Despite these operating cost pressures we continue to expect full-year performance in line with our existing outlook.

We continue to advance our development projects with encouraging results. During the first quarter we made progress with our engineering optimization permitting and community relations efforts on our Conga, Akyem, Hope Bay and Nevada projects. Collectively these opportunities currently represent up to 30 million to 40 million targeted equity ounces of potential reserve and resource development opportunities. Approximately 20 million of which are currently in proven and probable reserves, which could grow with positive exploration results over time. Our first quarter financial and operational results speak to the strength of our commitment to execution and increasing our financial returns. As well as to the dedication of our employees around the world to deliver safely on our plans and provide the highest value to our shareholders.

Moving to slide five, we remain bullish on metal prices. World class fundamentals including evidence of a rebounding jewelry market in India and growth from the jewelry market in China, plus sustained investor inflows and historically low central bank sales continue to support gold price performance during the first quarter of 2010. On the supply side, European net Central Bank sales were near zero, while Russia bought approximately eight tons of gold in the first quarter as it continues its gold purchasing program. With Central Bank sales essentially non-existent and some countries actually buying gold, extra supplies not being pushed into the market, causing supply to tighten even further. In addition to these factors, we believe mine supply will also remain constrained due to declining grades on a global basis. On the demand side, many developing economies are recovering faster than their developed counterparts, especially in countries like India and China, which are key markets for gold consumption. The continued recovery of these developing nations should have a positive impact on gold demand. In addition, medium term concerns surrounding sovereign debt rates in some regions are likely to favor gold as investors put their trust in in gold rather than currency. Overall investment interest in gold remains very strong as demonstrated by a record high for the amount of gold held by EPFs reached in the first quarter.

In In copper we believe a strong pricing environment will continue to be driven by a revival of consumption both in the West and in China. Additionally, the tight copper concentrate supply will likely keep upward pressure on pricing as demonstrated by relatively low smelter processing charges.

I would now like to turn the presentation over to Russell Ball, our CFO, who will get further into the details of our quarter.

Thank you, Richard, and good morning all. For the first quarter we generated revenue of $2.2 billion, a 46% increase over the first quarter of 2009. Net operating cash flow was approximately $728 million, a 91% increase over 2009, and our adjusted net income rose to $408 million or roughly 105% increase over the first quarter of 2009. Higher gold and copper prices and significantly higher copper production from our asset in Indonesia were the most significant contributors to the increase in net income.

Turning to slide seven, equity gold production was approximately 1.3 million ounces, and our average realized gold price was up 22% to approximately $1,100 an ounce. While our costs applicable to sales increased approximately 11% to $480 an ounce, gold operating margin expanded by 32% to $626 an ounce. On an year-over-year basis, CAS increased from $431 to $480 an ounce, primarily due to lower production as a result of the slide late in the fourth quarter of 2009 and higher mining costs in Nevada lower production, higher waste mining, higher royalties and workers participation in the Yanacocha and finally from the ongoing ramp up at Boddington. As Richard mentioned earlier, for the year we have maintained our gold production and operating cost guidance despite a change in our gold price assumption to $1,100 an ounce, and in our dollar assumption to $0.90.which collectively adds between $15 and $20 per ounce. As CFO, I'm more than happy to pay these increased operating costs given the positive increase in operating margin and free cash flow that accrues.

Turning to slide eight, copper production increased 143% to 90 million pounds with an averaged realized price of $3.33 per pound, an improvement of 97% from the year-ago quarter. Copper production was up significantly due to the fact that we're in Phase Five mining at Batu Hijau this year. We will essentially complete Phase Five mining at Batu Hijau this year and strippling for Phase Six will begin in earnest in 2011. Costs applicable to sale decreased 12% to $0.78 per pound, resulting in a 219% increase in our copper operating margin.

As you will see on slide nine gold margins for the quarter increased by a third to $626 per ounce despite the higher costs applicable to sales. When factoring in copper byproduct revenue as copper credits, our cash operating margin increases from 58% to approximately 78%. This leverage to gold and copper prices demonstrates our ability to generate significant cash flow from our existing production base of approximately 5.3 million ounces.

I will now turn it over to Brian Hill, our Executive Vice President of Operations to discuss our regional operating results for the quarter.

Thank you, Russell. As you can see on slide ten, each of our four regions performed essentially in line with expectations in terms of gold production, with North America's production being just a little bit higher than what we were expecting. Costs applicable to sales were slightly higher that expected in North America due to higher underground mining costs, higher production taxes and lower byproduct credits in Nevada. At Yanacocha, cost applicable to sales were higher than anticipated due to higher milling costs, lower production from the leach pads, higher workers participation in royalty costs related to the higher realized gold price, and lower byproduct credits. Costs applicable to sales at Ahafo in Ghana were slightly lower than expected due to lower power costs and lower mining costs. Costs in the Asia-Pacific region were essentially in line with expectations as higher cost production from Boddington as a result of lower than expected gold grades was offset by lower cost production at Batu Hijau due to lower mining costs and a lower allocation of costs to gold. The other operations in Australia and New Zealand performed as expected.

In summary, the portfolio is working and we continue to expect equity gold production for the year of between 5.3 million and 5.5 million ounces and costs applicable to sales of between $450 and $480 per ounce.

Turning to slide 11, I'm proud to give you an update on the ramp-up of Boddington. As a remainder, Boddington achieved commercial production in November of last year and the first quarter of 2010 represents just the first full quarter of commercial production. For the first quarter, gold production increased 34% to 158,000 ounces and copper production increased 40% to 14 million pounds from the fourth quarter of 2009. We're in the process of commissioning the fourth core source screen that was installed late in the first quarter and that is progressing as planned. Overall, our gold and copper recoveries have continued to be stronger than our existing mine plan. However, we have experienced some volatility in our ore grades, resulting in lower than expected gold grades and higher than expected copper grades as we continue to reconcile the block model with actual production.

Our site operation and commissioning teams continue to improve plant performance. The concentrator throughput is performing as expected and at levels consistent with the 12-month ramp-up schedule. As of the end of the first quarter total tons mined from the pit are within 10% of the current mine plan. We are hosting a site tour at the end of the September, and we hope to see many of you there, where we can show you more of the operation firsthand.

I also wanted to briefly mention the earthquake that we experienced near our KCGM operation last week. The 5.2-magnitude earthquake caused us to temporarily suspend operations for the safety of our employees and contractors. There were no injuries and no significant damage to our operations, and normal operations resumed the following day.

Guy Lansdowne, our Executive Vice President of Discovery and Development, will now give you a brief update on our major projects.

Thanks, Brian. As you know, we are very excited about our pipeline of projects that we anticipate will bring between 30 million and 40 million targeted ounces to production in the coming years. Of which approximately 20 million ounces are currently in proven and probable reserves, which could grow with positive exploration results. We won't get into too many details on the full extent of our project pipeline on this call. For that, we look forward to discussions with you at our investor day presentation on May 27th, where we intend to detail our projects in each of our regions.

Slide 12 shows our major projects in each our regions. As we indicated last quarter, we are advancing development of the Hope Bay district with an underground focus at the Doris North deposit. We have increased this year's funding for this program to between $180 million and $200 million, accelerating 2010 construction and development activities. As a result, we have increased our 2010 outlook for advanced projects R&D spending to between $230 and $250 million. Up from $185 million to $210 million. We are currently the primary supplier for this program from multiple ports on the east and west coast in a carefully coordinated sea lift, supporting development of additional surface infrastructure. We're executing development and exploration drilling programs with parallel with 18,000 meters of drilling completed so far this year and early results supporting our resource expectations. Although we're in the early stages, we remain energized about the opportunity and the experienced team and key contractors we now have in place on those significant assets. I also want to congratulate the Hope Bay team for recently celebrating two years without lost time accidents, over 1.2 million man hours, as of April 20th, 2010.

At Conga, we had a very successful public hearing on March 31st of this year with over 4,000 people participating in the event, including national and local government officials, farmers and other members of the community. In addition, we continue to build the Conga development team and create execution strategies while advancing engineering. Our Akyem project in Ghana is expected to complete the Stage four (inaudible) in the second half of 2010 with production still targeted for late 2013 to 2014. Following the receipts of the mining lease in January, negotiations with the local communities regarding land access and crop compensation continue and we're now about 70% complete with engineering work. We are also excited about the Subika expansion where we currently have identified a target of approximately seven to nine million equity ounces of gold, of which approximately three million ounces are in proven and probable reserves. We're advancing simultaneously with underground development programs. Our exploration and development team made good progress, advancing approximately 500 meters to date and we have completed approximately 8,000 meters of exploration drilling this year.

Turning to slide 13. As part of our Nevada portfolio, we have excellent new exploration results at our Leeville turf deposit that provide the possibility to double our current reserves with potential to expand within and beyond the footprint shown on the slide. In an effort to better understand the potential of this core asset, we have been executing in parallel a surface drill campaign and drilling from underground platforms with approximately 20% of this program completed so far this year. We drilled approximately 15,000 meters from surface in 2009 with the intent of better understanding the full extent of the ore body. The results of this program have been exceptional. To highlight a few results, I would turn your attention to the map on the right. On the north end of the map, the thousand meters behind our end of 2009 NRM and reserve footprint, we have intersected 10 meters at 13 grams per ton in the drill hole core CGXH. This combined with multiple favorable insteps to the south suggests potential to expand underground minable mineralization, well beyond current workings.

In addition, I would highlight the drill hole core CGX2 where we intersected 10 meters at 22 grams per ton, roughly 250 meters to the west of previously modeled mineralization. We're excited by these new expansion discoveries in our core Nevada assets and plan to increase funding for additional infill and stepout drilling.

I'm now going to pass the mike back to Richard for an update on our Batu Hijau ownership.

As previously announced, we recently completed the sale of the 2009 portion of the divestiture shares under our contract of work at our Batu Hijau operation in Indonesia. As you recall, in the fourth quarter we obtained a 17% effective equity ownership interest in PTN&T as a result of a loan made to our Indonesian equity partner. As you see on slide 14 at year end we directly owned 35.44% of Batu Hijau through our NTP investment with Sumitomo. Adding the 17% collateral ownership, our year-end 2009 economic ownership was 52.44% and we held that interest throughout the first quarter. In March we finalized the sales of the 2009 divestiture shares, which reduced our effective ownership position to 48.5%, which is where it stands at the end of the quarter. As a result of this sale, we've adjusted downward our 2010 outlook for equity copper production to between 330 million to 360 million pounds, down 20 million pounds from our previous outlook.

One final divesture tranche remains outstanding which is the final 7% of the PTN&T that was offered for sale on March 31, 2010. The offer price was $444 million for the 7%, or approximately $6.3 billion on a 100% basis. Once this sale closes, presumably sometime later this year, our economic ownership will decline to 44.56%. At that time, the divesture process will be complete.

Turning to slide 15, I would like to reiterate that Newmont continues to perform well operationally and financially. While simultaneously continuing the strive to maintain our leadership position in safety, sustainability and community relations. For the third consecutive year we were selected to the Dow Jones sustainability world index, an accomplishment of which we're very proud. We also achieved international cyanide code certification at all of our mines except at Boddington where we're still in ramp-up, and where we should expect to the certification in 2011. We're in the implementation phase of our community relations review, which we envision as our road map to uniform and industry-leading community relations throughout the world. And we have created our global carbon management team to help us navigate through the responsibilities of being a good global citizen through management of our carbon footprint.

In closing, we had another quarter of strong operational and financial performance and we continue to demonstrate our ability to deliver on what we say we will deliver. We continue to generate significant cash flow today from our gold and copper production, combined with a relentless focus on cost containment and margin expansion. We're in the process of executing on our business excellence program which is expected to create significant additional value across our regions, functions and the operations over the next three years. We're aggressively advancing our project pipeline as well as investing in our exploration program to develop our operating assets for the future. We'll be giving a lot more detail on these efforts at our investor day presentation on May 27 in Boston, for which we hope many of you can join us either in person or via the webcast.

I would like to express my thanks to our dedicated employees and contractors for another outstanding quarter. And with that, Operator, I would like to thank you all for listening and turn it back to you for questions.

Thank you, we'll now begin the question and answer session. (Operator Instructions). Our first question is from John Bridges.

Thank you, Richard, and everybody and congratulates on the results. I wonder if you could give us a bit of clarification on the finetuning of Boddington with respect to the grades of the gold and copper and maybe some sort of percentage breakdown as to how you expect the ramp-up to go during the year.

Yes. Let me just introduce this by reminding you we're in ramp-up, we're one full quarter into it, and as the slide shows, about four and a half months, because we really started in November. With that, Brian can talk a little bit about that. I would say the expectation for ramp-up is that, as we've said, we expect to be in full production towards the end of the year and we'll be ramping up along the way. It will be a little volatile back and forth and I think that includes both tons and grades and output. So Brian you want to add a little bit to that?

Yes, thank you, Richard. John, f you recall we said we were looking at about a 12-month ramp-up period to get to 100% production. So we're hoping to get there around the third quarter of this year. On a basis over Q1 we're actually running the plant at about 70,000 to 75,000 tons, which is getting close to 70%, 75% of capacity. That is essentially on target where we're were at. We're extremely pleased and happy with how the plant as ramped up.

With respect to your question around the grade, for us it's still early days. As we said we're just one quarter into full production. We have a number different geological domains that we're mining, and as we mine those and reconcile them to the model, it's really when we get actual production that we can go back and see how we're doing. As we said, we're slightly down on the gold grade and up on the copper grade, and I think we still need to get a couple more quarters under our belt of mining in some of the different domains to be able to come back with some more definitive answers around the reconciliation. A couple of things that we have done is that we did put the fourth core source screen in, we did leave space to be able to do that, because we always knew that the dry plant might be an area that we needed to increase capacity. We're also bringing in a fixed secondary crusher, a 6 MP 1,000. The space was left to bring that in. These are really to help increase the rate at which we get up to full production and, in fact, they are going to allow us, probably, to go over name-plate capacity as we get towards the end of this year and into 2011.

John, I would just add as we go into the year, we'll continue to provide information around grade and reconciliations. We just need some more time as we ramp this up.

Okay. And as a follow-up, I was very interested in the drilling around Leeville and other opportunities within Nevada, because you do have a big line position there. We have spoken before about projects that higher gold prices might become attractive.

We're very excited about the gold prospects in Nevada and I think after a number of years of making sure that we can get the operations right there, the team is really focused on growth. And Guy may want to add to that.

A number of projects that we have out there in addition to Leeville, we're obviously very excited about what we're finding there. Gold Quarry is another one of the big ones. In addition to that we have up to 25 projects in various stages of the pipeline spread throughout the state.

And from a return basis, obviously these are the highest-returning projects that we have really because we used a lot of the existing infrastructure. Although, if things continue at Leeville and Turf, as we're seeing, we'll be adding infrastructure to access that production.

And a challenge for us will be permitting, getting our permits in place, which we have a team actively working on to support development of these projects.

Okay. Great, guys. Good luck.

(Operator Instructions). Our next question comes from Jorge Beristain.

Good morning and congratulations on the strong results. This is the second quarter in a row you've topped dollar per share earnings, and you continue to maintain your divided policy at $0.10 in line with what you have done historically over the past few when you had a much lower EPS. So my question is where is management's thinking in terms of when would it make sense if to raise a dividend in the future, what would you favor, higher cash dividend or share buybacks? And then in terms of your growth, obviously there are some m&A opportunities happening overseas. Just wanted to get your view as to if you believe your best growth options are internal as you highlighted in Nevada and possibly in Africa, medium term?

So a couple of questions there. First on the dividend. As you know, the market for gold stocks doesn't necessarily pay an increasing value related to increase in our cash dividend. I would say though, if we do anything, it's more likely that we would probably have a cash dividend increase rather than a share buyback, because we also believe, although I can't say that financially this make a lot of sense, but it's not clear to us that per share metrics really drive a lot of valuation again in the market. We believe it should and over time, as it does, I think you will see us be more responsive to increases in dividends and perhaps, share buyback, if we continue to generate significant cash flow as we have over the past quarters. So our balance sheet looks in good shape to developed these projects. We're finding some interesting opportunities internally and that is where we would rather invest our cash versus than external projects or an increase in the dividend. We would rather go for growth and drive our return on assets up by having appropriate investments. I would say that relative to external investments, we would prefer internal investments every time. That doesn't mean that we won't look externally, but we'll look at that in terms of tradeoff between paying a premium to acquire something, issuing additional shares, because we do think dilution matters, and making sure that we properly evaluate opportunities if we do see something in the market for the upside that they may bring in addition to current assets. So I think a wide-ranging view here in terms of our openness to look at things, that as we continue to look, I would say that we continue to believe that exploration, project development, and M&A are the way we're going to continue to build the Company and we'll flex back and forth.

Okay, thank you.

Our next question is from David Haughton and your line is open.

Yes, good morning and thank you for the rundown. I have a couple of questions with regard to Batu Hijau. Firstly, the proceeds from the sales, are they recorded in your cashflow for the quarter?

Yes, they are, they're in the financing section, David. I can step you through it. You'll see a line in there, proceeds from non-controlling, it's about $220 million. And then the share at Sumitomo is entitled to through the NTP partnership of approximately $100 million is included in the line dividends paid to non-controlling shareholders. So what you see in the financing activities section is the net of about $129 million that accrues to Newmont shareholders.

To be clear, though, Russ, they are not in our operating cash flows, they're in the financing cash flows.

That is correct.

Thank you, Russell. I was looking for that $129 million. The second question still on Batu Hijau, I noticed you are in the bottom of the pit and it is seasonal whether you're down in the bottom or not. And you had experienced that the higher tonnage in grade was a result of that. What kind of profile could we expect for the balance of the year?

David, it's Brian. We're not quite in the bottom of the pit yet. We're still mining in the upper benches in phase 5. We're getting better grades and better mill throughput. We're just coming into the dry season now, so we're in the process of dewatering the bottom of the pit in phase 5. So our expectations are that we'll be down in the bottom of phase 5 later in Q2 and Q3, until the rains come again, either late Q3 or early Q4. So we should see higher production coming out of Batu over the second and third quarter as we get into the sweet spot which is the essential core at the bottom of phase 5.

Just following on from there, I resume as the conditions turn against you, slightly lower production in the fourth quarter and then you start in 2011 moving into the stripping phase.

That is correct. Slightly lower in Q4 and 2011, as Russ mentioned, concentrated stripping in phase 6 with lower production next year.

All right. I have another question, different topic, looking at Hope Bay. I heard you mention that you are expecting to spend $180 to $200 million on Doris. Is that correct for this year?

Yes, this is Guy. That is correct. The last time we mentioned we were planning on spending on the order of $140 million this year, and we have increased that spending to between $180 million to $200 million. We're advancing activities that we planned for 2011 into 2010 and the bulk of it is shipping supplies and equipment up. We're busy, underway, at the moment with an intense effort, as I mentioned earlier. And what we will do is to start the decline later in the year, which is going to take up a fair amount of that cost. In addition to that we have drilling activities and we've advanced a number of infrastructure construction activities, like roads, camps and fuel farms. So we're pretty excited about the program that we have gotten underway this year.

Would we see that kind of pace of expenditure in 2011 as well?

We certainly hope so. A lot of it depends on what we find when we get into the decline and we start exploring underground, but our hope is that we'd continue at a pretty aggressive pace if all the signs are positive.

Do you have a sense for what the total project CapEx might be?

Not at this stage, David. We're in the real early stages, again, depending on what we find as we get into the decline, and as we go through the study phase, we'll develop a range. But it's a little too early to give any idea of what the total CapEx might be.

And then the development potential of Madrid and Boston will be pushed sometime out into the future and you are focusing on Doris at the moment?

Yes, that is correct. We're focusing on Doris right now, but obviously Boston and Madrid we would like to follow pretty shortly after Doris. Again, positive results pending.

Now with this decline, clearly it's still exploratory at this stage, but I presume it would be built to development scale if things turned out the way you hoped it would do.

Yes, the Doris project is one that we have actually got a permit for at present. So we would concentrate our efforts over there. It would be pretty small-scale. Again, if positive results, we find positive results in the decline. We're focusing on understanding what the grade and continuity would be, what the mining costs would be, taking into account geotechnical and geological condition. Obviously that will give us a better feel for what the district might look like.

On a different continent now, I heard that the superpit earthquake had disrupted some production. Is that going to have any impact on the second quarter output?

No, it actually didn't disrupt any production we had at KCGM, David, so it's not going to have an impact on us.

That's it for me, thank you.

Our next caller is Barry Cooper, your line is open, sir.

Just wondering if you could clarify some of these numbers you have at Leeville and Turf, obviously quite interesting. But can you tell me what is the cutoff you are using for your mining at Leeville, just so we can put it into context of what rises above and below the threshold there.

I'm sorry, I don't know the curtain cutoffs off the top of my head. This is Guy. I can certainly get those for you and we do have investor day coming up May 27th where we would love to go through these projects in more detail with you. So my apologies.

I can follow-up after the call with that.

Okay. Then the second question, I'm assuming you are having some pretty good success with high-pressure grinding rolls and what not. Is there any other application you can see using those for, because obviously there are others out there in the world that are using these more and more now. And indeed, I have to assume that you have a boatload of low-grade sulfide mineralization that is too low-grade for your mills, but might be something that could be (inaudible) if it went through high-pressure grinding rolls because that is certainly being contemplated now. Have you in fact, started doing any of that work or the thought process?

Barry, we're pretty excited about the way that (inaudible) are performing at Boddington and we certainly look at these, where applicable for some of our earlier stage projects. Obviously you need very hard material. They tend to be much better performance with hard material. Certainly as we go through projects where that could be applied, we take that into consideration.

Barry, one place we might look at them is an application in Batu. And if we look further out at some of the other opportunities like we have in Indonesia, they performed exceptionally well for us at Boddington. We just couldn't have asked for better performance other than so far in this first phase of ramp-up.

What about things in and around Phoenix? I realize it's a different beast and what not, but I think of that as being (inaudible) and typically very hard mineralization there as well. And I know you maybe don't want to upset the apple cart, because that one had trouble starting up and you've mastered those now. But is there anything there that could be utilized there or elsewhere in Nevada?

I think there are certainly some potential applications that we'll continue to look at. It's wonderful to have this operating experience coming out of Boddington and we're certainly going to take that and leverage it going forward. As you know, they present a form of crushing which just brings a significantly lower power cost to actually crush rock.

Thank you very much.

Our next question comes from Patrick Chidley, and your line is open.

Just a couple of quick questions. Firstly on the philosophy with regards to growth. You have got all of these great projects that you are bringing forward slowly over the next few years. What are you thinking about the balance of geography that you would be comfortable with in terms of balancing different countries and the country risks? Is there any firm views on percentages you'd have in developed markets and non-developed markets?

Hi, Patrick, it's s Randy. We actually feel very comfortable with the mix we have right now. We have a presence across the globe. We have a good set of four core region and we're comfortable in each of those regions. We're comfortable looking to expand in each one of them. So you see us looking to expand in South America, we have expansion in North America, we've got the same in Africa, and you will see us doing the same in APAC. Those are certainly our first choices to expand around those regions. But we do have appetite to go beyond that as well.

Patrick, it's Richard. Maintaining a good level of production, whether that's 50% or 40%. But something like then to Triple-A overtime is currently where our portfolio sits. And to the extent that we continue to look to add to that, I would hope that we would be able to either develop or acquire assets that continue to have triple-A ratings so we can actually balance the overall portfolio over time, with the proviso that who knows what triple-A is going to be as we move in time here.

Right. But basically you want to keep that mix that you have as a cornerstone of the portfolio mix.

Yes, we have averaged about half of our operating margin coming out of Asia Pacific and North America with that focus out of Australia and Nevada. That is a mix to the extent we can keep roughly half of that in that kind of profile, that is preferred.

Great, thanks. And just a quick one on exploration. Boddington, you mentioned anything on what has been going on at Boddington. I think last quarter you referred to some positive results and I just wanted to see where you were on that.

Patrick, this is Guy. The positive results were on the northern extent of the pits and so we have seen relatively higher-grade material. We continue drilling in the area, looking for similar opportunities. Obviously they are a little further out in the mine plan, but as we are doing it at Gold Quarry and Leeville we're trying to understand the fuller extent of these opportunities so that we can optimize them down the road. That is what we plan to do going forward with Boddington.

So it's just an ongoing process, really?

Yes, that's right, Patrick.

Great, thanks very much.

(Operator Instructions). Our next question comes from Stephen Walker and sir, your line is open.

Thank you very much, Operator. Two questions. The first with respect to the government of Ghana has made some comments here recently about revisiting existing tax and royalty structures for the mining operations in Ghana. First of all, can you give us an update on where that stands and potential impact for Ahafo. And secondly as part of that, with respect to receiving the mining lease for Achim, what if anything has been decided in the way of taxes for that project?

Thanks, Steven for that question. I will try to answer both at the same time. We have an investment agreement that was entered into before we began the development in Ahafo. And because we knew that Achim might at some point be developed, actually Achim is covered by the same investment agreement. So we're actually protected, if you will, against upward changes in the taxes, changes in the tax structure and upward changes in the royalty. All of that said, we do have a new government that came into place at the end of the year and they have indicated a desire to review our investment agreement and what we have told them is that we have a contract but of course, we'll sit down and talk with them. So what I would tell you is while we won't be impacted directly by some of the changes that continue to be talked about in the government and in the impact on other mining companies, I would tell you that while we're protected, we do want to be a good citizen in Ghana, so we'll probably make some changes overtime. I don't know what those look like and I would tell you that because we have an agreement, they probably won't look like everybody else's. But we'll try to make sure that while we assure shareholders of return, if we continue to be in an environment of higher gold prices that we do reflect some additional return back to Ghana. But this is all under development and we'll see how it goes as we move forward over the next couple of months. I would say it's probably going to be that kind of timeframe before we really know what the total impact is going to be and we'll keep you apprised.

Great. Thank you, Richard. The second question has to do with cost outlook on a quarterly basis. You have seen a sharp rise from the fourth quarter costs of about $413 on a product basis to $480 per ounce, the $480 is at the upper end of your guidance, which suggests that going forward there is potential for decline. I don't know if you can give us any detail on how you think the quarters will look or is it safe to assume that it's going to be a much more positive contribution for Batu in second and third quarter and then an ongoing positive contribution from Boddington? Just with respect to quarterly modeling can you give us a little more guidance for 2010?

Steve, it's Russ. You are essentially spot-on. As Brian mentioned earlier and historically what we have seen is a strong Q2 and Q3 in the dry season in Indonesia. As we mentioned earlier, we'll be in the bottom of phase 5, and that's where the higher-grade copper and gold sits. So we'll have a nice second and third quarter there. And with the ongoing ramp-up, as you saw on slide 14, the ramp-up curve, as that continues to progress to full production, we'll see costs decrease in Australia, and production increase. So you should model that in. And, again, we have changed our assumption on gold price and FX and that's added about $15 to $20 an ounce and we've absorbed that into the cost guidance. So yes, it has moved towards the upper end, but we still feel very comfortable we can deliver based on the results of the first quarter, at lete. Thank you very much, Russell.

I would now like to turn the call over to Mr. O'Brien for any closing comments.

Thank you, Operator and thank you everybody for attending our call today and we look forward as we said to seeing many of you either in person or over the webcast on May 27th. Have a great day.

This concludes today's conference call. We appreciate your participation. You may disconnect your lines at this time. Have a great day.