紐蒙特黃金公司 (NEM) 2010 Q2 法說會逐字稿

Good morning and thank you for standing by. All lines will be on a listen-only mode follow until we open for questions and answers. Today's conference is being recorded. (Operator Instructions). I'd now like to turn the call over to John Seaberg, Vice President of Investor Relations for Newmont Mining Corporation. Sir, you may begin.

Thank you, operator, and good morning and thank you for joining us on our second-quarter earnings call. With me today are members of our executive leadership team, who will be available for questions at the end of the presentation. Before we begin, I'd like refer to you our cautionary statement on slide two as we will be discussing forward-looking information, including outlook guidance, which cannot be guaranteed and is subject to 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. And now I will turn the call over to Richard O'Brien, our President and Chief Executive Officer.

Thanks, John, and good morning. For those of you with access to our webcast presentation, we'll start on slide three with an overview of the investment thesis for Newmont. First, our ongoing focus on execution and maintaining our operating track record has been and will continue to be job one for us. With consistent operational execution comes gold-price leverage and strong cash flow generating capacity, which in turn provides us with balance sheet strength and the flexibility to invest in our business. Delivering operating performance today provides us with the possibilities of the future. As we've described before, our current balance sheet and free cash flow generation afford us the ability to essentially prefund our fortified $1 billion pipeline of advanced projects. Finally, we continue to focus on maintaining a position of leadership in the areas of safety, the environmental and social responsibility, as well as employee development. These leadership positions are the cornerstone upon which our business continues to be built.

Moving to slide four, as I noted before, our focus on dedication to operational execution is job one. During the second quarter, Newmont produced 1.3 million equity ounces of gold at costs applicable to sales of $492 per ounce, with our North American region contributing 36% of total quarterly equity gold production, South America contributing 14% and Africa contributing 10%. Our Asia-Pacific region contributed the remaining 40% of our quarterly gold production and the majority of our 80 million pounds of equity copper production. Within our APAC region our newest mine, Boddington, continues ramping up to full capacity and produced 184,000 ounces of gold and 15 million pounds of copper in the quarter. We are maintaining our overall outlook for full-year 2010 gold and copper production, capital expenditures and gold operating costs within the original ranges we provided in February, although lower production at Yanacocha, higher costs ramp-up production at Boddington, higher gold royalties and taxes, as well as adverse movements in the Australian dollar continue to put upward pressure on our costs, which suggests we'll end the year toward the end -- the top-end of the CAS range.

Turning to slide five, as I noted before, our strong cash flow generation coupled with over $6 billion of liquidity affords us considerable flexibility to profitably develop our business and generate returns to our shareholders. In the second quarter, we generated $753 million of operating cash flow, up about 50% over last year, and $434 million of free cash flow. For the first two quarters, we generated a total of approximately $1.5 billion of operating cash flow and $875 million of free cash flow. As you may have also seen earlier this week, Moody's upgraded our senior debt rating from a rating of Baa2 to Baa1. As this slide highlights, we intend to continue to invest our free cash flow and available liquidity in a combination of project development, exploration and value-oriented acquisition opportunities.

In addition to investing in our business, when our liquidity and free cash flow generating capacity allows we will also look for opportunities to return capital to shareholders. Today we were pleased to announce that the board has approved a 50% increase in our regular quarterly dividend to $0.15 per share, for an indicated annual dividend of $0.60 per share, effective September 29. We believe that our business is strong enough to both reinvest capital at attractive returns and offer higher dividends in a higher metal price environment, which we feel positions us uniquely in the gold equity market, as well as against the gold ETF.

As we discussed during our investor day in Boston, we're intent on providing investors with a sustainable range of gold and copper production over time that offers current and ongoing exposure to gold price, as well as competitive financial returns. We continue to see numerous internal attractive project development opportunities. Akyem and Conga, along with Hope Bay, Greater Leeville/Turf and Gold Quarry West Wall collectively represent up to 30 million to 45 million equity ounces of potential reserve and resource development, of which approximately 20 million are currently in proven and profitable reserves. We believe the combination of our pipeline of projects and our exploration portfolio will continue to allow us to extend the lives of our operating regions for many years to come. I'll now turn the presentation over to Russell Ball, our CFO, who will provide further details on our second-quarter results.

Thanks, Richard, morning, all. Moving to slide six, as Richard previously mentioned, equity gold production for the quarter was approximately 1.3 million ounces, an increase of 10%. At an average realized goal price of $1,200 an ounce, an increase of 31%. Gold operating margins expanded 44% to $708 an ounce, despite a 16% increase in operating costs. Moving to slide seven, I wanted to spend a little time discussing the reasons for the increase in operating costs. As you can see on the waterfall, lower production at Yanacocha where we encountered unexpected transitional [war] that was stockpiled for future processing through the mill and higher cost production at Boddington, which Brian Hill will cover shortly, were the primary drivers of higher costs for the quarter. Higher silver byproduct credits offset some of the cost increases that you can see represented on that waterfall.

Turning to copper on slide eight, production increased 56% to 80 million pounds as a result of Phase 5 mining at Batu Hijau and the ramp-up at Boddington. The average realized copper price of $2.33 per pound improved by 7% from the year-over quarter, but included a provisional pricing adjustment of $0.62 a pound. Higher operating costs were due to higher milling costs at Batu Hijau and higher-cost Boddington production coming on line.

Moving to slide nine, for the second quarter we generated revenue of $2.2 billion, a 38% increase. Net operating cash flow from continuing operations was $753 million, a 49% increase, and adjusted net income rose to $377 million, or $0.70 a share, an increase of 79%. For the quarter, reported net income was negatively impacted by a couple of items. You might have noticed we had a higher effective tax rate of 33.6% versus 29.6% in 2009 and approximately 15% in the first quarter. The difference of roughly 4% quarter on quarter impacted earnings per share by about 7% -- right at $0.07 a share, sorry. Notwithstanding a higher tax rate this quarter, our effective tax rate for 2010 remains unchanged at between 24% and 28%. We had a copper provisional pricing adjustment, as previously mentioned, of about $79 million, which impacted earnings per share by about $0.06 a share. We mark-to-market at quarter end at $2.96 a pound. I think this morning, checking earlier, copper was trading around $3.25, so we will see most of that come back in the third quarter.

And finally, we had a delayed shipment of about 30,000 tons of copper concentrate from Batu Hijau that was scheduled for quarter end and it got rolled into the third quarter, which impacted earnings by about $0.03. You can see the impact of that in the second quarter and most of that will come back in the third quarter. So when you step back and look at it, I think the key job for us, to deliver significant gold price leverage to the bottom line and that's what you saw in the quarter. We had a 79% increase in earnings per share on a 31% increase in average realized gold price. I'll now turn it over to Brian Hill, our Executive Vice President of Operations, to discuss our regional operating results for the quarter.

Thanks, Russell. As you can see on slide ten, North America produced 463,000 ounces of gold, up 4% from the year-ago quarter. The increase was due to higher production at La Herradura due to commencement of production in the new Soledad and Dipolos pits, as well underground increases at Midas and Leeville. This was offset by lower leached ore production and reduced production as a result of the Gold Quarry slide. Costs applicable to sales were $585 per ounce, up 9% due to a higher proportion of underground mining and additional surface costs due to the Gold Quarry slide. We continue to expect North America to produce between 1.7 million and 1.9 million ounces of gold for the year, within our original CAS outlook range of $575 to $615 per ounce.

In South America, we produced 181,000 equity ounces, a decrease of 32% from the prior year. This decrease is due to lower mill ore grade and recovery, combined with lower [leached tons placed] due to the stockpiling of transitional ore. Costs applicable to sales were $389 per ounce, up 20% from 2009, due to lower production, higher waste mining and higher maintenance costs, production taxes and royalties as a result of the higher gold price. We anticipate Yanacocha to have a strong second half. South America is on track to produce between 750,000 and 810,000 equity ounces of gold for the year. However, we believe CAS may come in at the high end of the original outlook range of $360 to $400 an ounce, due to lower-than-expected leached tons placed and silver byproduct credits.

In Africa we produced 132,000 ounces, a slight decline from 2009, due to lower grade and recovery, as we have moved out of the [Subiku] pit and into the [Epansu] and [Awansu] pits, offset partially by higher throughput. Costs applicable to sales decreased 3% to $416 per ounce due to lower milling costs, partially offset by higher fuel costs. We are pleased to report we have increased our outlook for full-year production at Ahafo to between 500,000 ounces and 530,000 ounces and our cost applicable to sales outlook has been lowered to between $475 and $515 per ounce, as we are seeing higher grades than projected.

In APAC we produced 520,000 equity ounces of gold, a 64% increase over 2009, primarily due to production at Boddington which was not in production during the second quarter of 2009. Additionally, we benefited from higher production at Batu Hijau. Costs applicable to sales in Asia-Pacific were up 17%, primarily due to higher cost production from Boddington during the ramp-up, a stronger Australian dollar and lower production at the Tamami due to mill availability issues.

Moving to slide 11, as Richard mentioned, we continue to ramp up production at Boddington, having declared commercial production in November 2009. For the second quarter, gold production increased 16% from the first quarter of 2010 to 184,000 ounces and copper production increased 13% to 15 million pounds. The processing plant continues to perform in line with our expectations and should achieve name plate capacity in the fourth quarter. In the first three weeks of July we saw the plant operating at approximately 97% of capacity. However, costs applicable to sales have been higher than anticipated due to a stronger Australian dollar and higher-than-expected mining costs during the ramp-up.

On slide 12, now that we're several months into the ramp-up, we wanted to give you an update on some of the positives and challenges since we started delivering ore to the plant last year. On the positive side, recoveries for both gold and copper have exceeded feasibility study estimates to date. We have also mined 23% more contained copper than [mottled] with higher quality concentrate helped by better-than-anticipated performance by the high-pressure grinding rolls and the wet plant. However, we have encountered approximately 12% lower-than-mottled contained gold thus far, offset somewhat by 23% more contained copper. In addition to the -- in the dry plant we are seeing higher wear in the primary and secondary crusher circuits than we expected. We've also seen mining costs higher than expected due to increased costs related to drilling and blasting and stockpile rehandling. As a result, equity gold production for 2010 is now expected between 750,000 and 825,000 ounces at costs applicable to sales on a co-product basis of $475 to $550 per ounce. For the reasons we just discussed, we believe we will achieve the 2010 copper production outlook of between 65 million and 75 million pounds. We now believe copper costs applicable to sales could be between $1.55 and $1.75 per pound.

Looking ahead to 2011, as the mine begins its first year of steady-state production, we expect equity gold production at Boddington to be between 850,500 and 925,000 ounces at costs applicable to sales of between $475 and $525 per ounce, which we believe to be conservative given the expected increase in production. Beyond 2011, our outlook for Boddington's operating performance is subject to further data collection and analysis as we gain more experience with the mine. I want to highlight the fact that we've only mined 2% of the reserves of this 20-plus year mine life asset and feel that it is too soon to draw conclusions on the long-term impact of the model reconciliation experienced during ramp-up.

Turning to slide 11, I'd like to give a brief discussion on Batu Hijau. The second quarter was anticipated to be a strong quarter as we began to access higher-grade ore from the bottom of Phase 5 in the traditional dry season. As you can see from the photo take on April 25th, we experienced unseasonably heavy rainfall during the quarter, limiting our access to the bottom of the pit and requiring us to produce from lower-grade stockpiles. We believe that we should be able to make up this delayed production in the second half of the year, assuming a normal dry season pattern, and are maintaining our original production outlook. As an update to our ownership position, no shares were divested during the quarter and our effective economic interest remains at 48.5%. We offered the final 7% ownership stake for sale in March, and negotiations of the purchase price are still underway with the central government.

So what does this all mean for our full-year outlook? As you can see on slide 14, our portfolio continues to perform as we continue to expect full-year gold production in the range of our original outlook of 5.3 million to 5.5 million ounces. However, we're tightening our outlook for CAS to the narrow range of $460 to $480 per ounce, based on the factors we've already spoken about. And now I'd like to turn the call back over to Richard.

Thanks, Brian. Turning to slide 15, I want to reiterate that safety environmental stewardship, sustainability and leadership and corporate social responsibility remain hallmarks of our business and we believe these attributes offer us a competitive advantage. For the third consecutive year we've selected to the Dow Jones Sustainability World Index. We're also ranked 16th overall on the 100-best corporate citizens list co-filed by Corporate Responsibility Magazine. And Newmont is the sole mining Company featured in the top 20. In addition, in May we were announced as the winner of 2010 Global Business Coalition award for our workplace malaria and HIV/AIDS program in Ghana. And just in the past few weeks Newmont was awarded the 2010 Secretary of Defense Employer Support Freedom award. This is the highest honor presented by the US Government to employers who provide outstanding support to employees serving in the Guard and Reserve. We're very proud to support our employees who dedicate their time and effort to the Reserves and to our country, and we appreciate the government's recognition of our employee support.

Turning to the last slide. In summary, we continue to generate significant free cash flow in the strong metal price environment. We're pleased to be in a position to increase cash returns to our shareholders in the form of a dividend increase, as well as to continue to drive sustainable longer-term returns, through developing our most perspective projects, continuing to find exploration opportunities and considering strategic value-oriented M&A transactions. We do anticipate a strong second half of the year as we continue to focus on execution and we are confident that we can, once again, deliver on our annual guidance for production, cost applicable to sales and capital expenditures, generating operating cash flow that is leveraged to gold price and allows us to reinvest in our business and return cash to shareholders. And with that I'd like to thank you all for listening and open the call for questions.

Thank you. (Operator Instructions). Our first question comes from John Bridges. Your line is open.

Morning, Richard, everybody.

Hey, John.

Hi. Congratulations on raising the dividend. That is a great sign of confidence and I just wonder if we're headed into the old-fashioned bumper Q4 result that we got used to from Newmont?

No, I don't think it's going to be the bumper fourth quarter result. I think with the ramp-up of Boddington, with higher leach pad placement at Yanacocha and with Batu really coming into the dry season, I think all of those things over the next two quarters will really put us in the position where we're going to deliver on the year. We will see some ramp-up towards the year end. We have had the traditional second-quarter shutdown of one of our mills in Nevada, but I don't think it's that traditional fourth quarter big push. This is all well within our plans.

Okay, I'm glad to hear it. Just wondered with the grades issues at Boddington. After having gone through this situation with Phoenix I just wondered if you can compare and contrast that situation with this?

Yes, I'll start and then I'll turn it over to Guy. First, I would say this is a project, Boddington, which has been really well within Newmont and previous to that, Normandy's control, and I think based on a lot of data we have analyzed over time and had many others analyze, I've got to tell you, I am very confident with the work we did in modeling and the reserve work we've done, as well as the design of the process plant. First and foremost, we had processing issues at Phoenix from day one. We have not seen that at all from Phoenix in term -- sorry, from Boddington. In terms of recoveries, we're seeing very good recoveries out of the mill at Boddington. We didn't see that when we started up Phoenix.

With respect to the reserves and model, I'll turn it over to Guy.

Good morning, John.

How are you doing?

Yes, I'm doing well, John, how you doing? John, just to talk about Phoenix, our belief is Boddington is not at all like Phoenix and this is -- there's many important differentials. First of all, Phoenix experienced a number of issues related to the oxide zone. There was a much bigger oxide zone in the Phoenix deposit that caused problems in the mill. The mill wasn't designed to handle that. At Boddington, all of our material is primary sulfide, so we're not going to see that issue. Phoenix had a significant amount of historical data of non-core drilling that has proved to be bias and that led to an overestimation of gold. At Boddington, most of the drilling has been completed under the control of Newmont and its partners. And finally, Phoenix has course goal that led to estimation issues and difficulties of ore control misclassification. The deposit type of Phoenix has gone and those are notoriously difficult to model and predict. Boddington is not a strong deposit and while course gold does exist, the gold particle size is much finer and doesn't make up as large a percentage of the contained metal as it did at Phoenix.

Also building on what Richard said, there's been a tremendous amount of work done on the model itself. There's a number of work done by many, many different sources. We've got a strong underlying drill hole database that we've had numerous external orders and continuous QAQC programs. The data is dominated by core drilling, which has excellent recovery and check assays during the course of the feasibility study suggests the database was actually conservative. Now just building on the reviews that have been done, we had ten external reviews during the feasibility study and eight external reviews since that time. Numerous internal reviews by Newmont and of course, we had our partners, Newcrest and Anglogold, involved at the same time. So in addition to that, (inaudible), which demonstrated that the grade should have been above expectation. Additionally, it's a very large deposit, it's very well drilled and it should be robust. And I have to re-emphasize that it's still very early days with only 2% of the ore body mined toda, but we've got a much better database and much more confidence in the underlying data for this deposit.

Okay, Guy, you've convinced me. Congratulations.

Yes, thanks for that, John.

You're welcome.

Thank you, our next question comes from Barry Cooper. Your line is open.

Yes, a couple of questions, first on Batu Hijau. Basically when you adjust on your ownership Q2 was actually better than Q1. So I'm wondering, you've made cautionary statements there that it wasn't a very good quarter relative to what you were expecting, so what should we expect then for Q3 and is the water still in the pit or are we all dried out at this point in time?

Barry, it's Brian. What we had to do in Q2 with the unseasonable rain we had is, without having access to the bottom of the pit we ended up having to pull most of the ore off of lower-grade stockpiles, so that led to lower than what we had expected production to be for Q2. The pit is dry. We are now operating in the bottom of the pit. The other thing that we've also started is we've also started all of the dry season work, including the work we can do now that we have the (inaudible) to be in position for stripping in phase 6 and all of the other drainage work and rediversion work around the pit that we need to do so we can get stripping going in phase 6.

So, Barry, I'd summarize by saying I think Brian and the team felt in the end of the first quarter that we'd probably be ahead of our estimates for the year just based on first-quarter performance and now it looks like we're probably more likely to be right on our estimates for the year.

Okay. And so what kind of grades are you encountering there, say, for the month of July?

I don't have the answer to that. We'll come back to you with that. Sorry, Barry, John will come back to you.

Okay. Then the (inaudible) -- I haven't gone through the whole MD&A section of the 10-K, but just wondering. You indicated in your release that there was a lower grade as a result of ore dilution in Australian and New Zealand. I'm assuming that's some of your underground operations and I'm just wondering what you want to tell us about that dilution and whether this is something that should be anticipated going forward or not?

Barry, it's Brian again. The issue that we had underground was really at the Tanami and it really had to do with one large major stoke that was the main source of production during the quarter. It had intersected a major fault zone in the hanging wall and there had been some unraveling. That led to some unexpected dilution on grade coming out for the quarter from the Tanami. We're through and finished with that stoke, but we've taken some learning from that operation and done some modifications to stoke geometries, access, et cetera, so that's not an issue that we expect to have going forward coming out of the Tanami.

Okay. And then coming back to Boddington because I'm not quite as convinced as John is, the costs that you're talking about here. Now, obviously, if you're getting more copper and less gold that should actually help your by-product cost the way you report it and, yet, that doesn't seem to be what's happening. So, I'm wondering, you identified a couple of things, one being the Aussie dollar, one being the gold production, but there seems to be something else with respect to the site direct mining costs and what are you seeing there that's going change or, in fact, is that going to be permanent higher costs going forward?

So, Barry, let me start first. Please note that the cost estimates that we provided are on a co-product basis. They don't include the by-product credit and Brian can talk a little bit more about what we expect with respect to the by-product credits.

Yes. Barry, from the cost perspective what we're seeing is we have been experiencing higher wear, as I mentioned, in the process plant, primarily in the primary and secondary crushers. So, we've been seeing shorter life coming out of the bowls, mantels and other wear components. That's led us to be changing some of those out quicker and on shorter schedules than we'd originally expected. I guess what we are seeing is, we are seeing that the average hours between change out are increasing, so just as everybody works through getting the right wear material, the right composition of wear material, I think we expect to see those numbers come down on wear in the plant. The high-pressure grinding rolls are wearing as expected, which for us we're really pleased about that. We expected to get around 5,200 hours on those and that's precisely what we're seeing. So, we've had some wins and -- wins in the process plant and we're also seeing some wear issues there, which wasn't unexpected and we'd actually anticipated that.

In the mine what we've experienced is we tightened up the drill pattern. We're really trying to get that optimum fragmentation size so that we can get the mine to mill process optimized. Our drill spacing is tighter, we've had to do more drilling than we'd expected. We've also increased the powder factor. That's still a learning process we're going through, but that's one of the issues contributing to the higher cost. Another issue, too, is we've been trying to get the highest grade through the mine, so we've actually been going to more selective mining and more stockpiling and more rehandle coming off the stockpile so we can really optimize the grade that we present to the primary crusher and into the plant. So those are really the principle components that have led to the higher operating costs.

Barry, Russ. I'd just add we're into the wet season down there and we spent a significant amount this quarter on road-base and getting the roads in shape to get the truck productivity up. So, those costs, while we will have an on going component of those, we had a big effort this quarter, really, to get the roads in shape. I'd also, Barry, just point you to your earlier question on by- and co-product. If you look at page 12 on the release, you'll see the Boddington broken down on both a co-product and a by-product and the $582 represents the co-product that Richards -- As Richard said, by-product is about $503 for the quarter.

Great, I just noticed that the by-product was going up about as fast as the co-product costs and certainly in your presentation there. Just coming back, then, for 2011, that was to be a plus million ounce year. Is a million ounces coming from Boddington not achievable in your opinion now going forward?

Well, as we said in our release today, we brought down the estimates based on what we're seeing to date in the model, and those are our best estimates at the current time. We will continue to do all the work that Brian talked about and try to do everything we can to make sure that this grade issue is well defined and we do the best job we can in the mine to reduce the amount of dilution. So, really, as we do look into 2011 our current expectation is that Boddington will be between 850,000 and 925,000 ounces. That is the level that we project today. I would say that with only 2% of the reserves mined to date, all the data the Guy has talked about with respect to how we modeled this deposit initially and with the fact that most of this problem is really mining elated and not processing related, I've got to say I hold out high hopes that we'll continue to work our way through this positively. I like to have the problems in the mine. That's what we're good at, we will figure this out. The processing plant is running well and I think with that I think the expectation is that we can push the processing plant up beyond nameplate capacity and if we need to put more ore through the mill at a lower grade to get additional recoveries, I hope that that's the plan we're able to put into effect.

Right, okay. And then just to clarify then, Richard, so the production profile for Boddington next year has incorporated, say, a 12% drop in grade that you anticipate could be recurring?

Yes, that's our estimate for 2011.

Right. Okay, thanks, that's all my questions.

Okay. Thanks, Barry.

Thank you. Our next question comes from David Haughton. Your line is open.

Yes, Good morning and thank you. Just following on from some of those interesting discussions on Boddington. With regard to the 12% lower gold, did you also increase the copper expectation by the 20% that you were anticipating?

David, no we haven't made that increase. That's really what we've seen on a historical basis so that hasn't been changed.

Okay. One of the things that I've noted was that the recovery sees to be a touch better than what we had previously seen on some of your testing. Is that what you expect, as well, going forward?

Yes, that's what we expect to see. We've got no reason to not doubt the improved recovery that we've seen so far.

Should we be thinking about the 82%, 83% for gold as something going forward for recovery?

Yes, I think that's a fair range to assume.

And in regard to copper moving up it to perhaps the 84% level?

That's a fair assumption, as well, yes.

Okay. And I was listening to what Brian was saying with regard to some optimization. We had previously anticipated that there could be optimization of being able to process more than the 2.9 million tons per month. Are you going to be looking at increasing the (inaudible)?

Yes, we are. As Richard mentioned, that's part of this whole process that we're going through is looking at additional ways we can debottleneck the processing plant. What we really want to do is to get the bottleneck in the grinding circuit, and what we see is that we've still have capacity in the grinding circuit and in the wet plant moving forward. And what we'd really like to do is be able to take advantage of that installed capacity and we'll continue to work on looking at options to debottleneck to get that bottleneck into that part of the plant.

All right. Now, switching back to Batu Hijau, in the third quarter can we expect a catch up in sales? Sales was lower than production, you had some 30,000 ton of (inaudible) that missed the shipment. Would we expect a catch-up of that in the third quarter?

Yes, David, it's Russ. Yes, that shipment has actually gone so I guess that we had a vessel due in right at the end of the quarter and there was some logistical challenges in whatever harbor it was in and so it showed up a little late. So those sales have already gone so that will be caught up in the third quarter. As Brian mentioned, the rainy season generally comes mid to late October, so the function of the third quarter will be dependent -- and the fourth quarter, quite frankly, on when the rains come. But today, it looks very good.

Because the third quarter does have a few things working for it. You've got better grades that you've got access to, you've got the catch-up of the south and then you've got a positive reversal of the [price] participation?

Yes, the mark-to-market that we saw at quarter end that paid us about $0.06, we marked at $2.96. As I said, I think copper was trading $3.25 this morning and we'll get most, if not all of that back and then some. So you're right, it should be a good third quarter.

Now, Russell, you're talking about the mark-to-market and participation. Can you walk us through how you ended up with the $0.62 downward provision?

Yes. So we mark essentially the 90-to-120 days in concentrate sales that are outstanding at quarter end, because of the contracts we have in place, to the quarter-end spot price, which is $2.96, and then the forward curve out for the next three, four months. So when we did that adjustment, as the price was falling during the quarter, we recognize provisional sales,, we market to that $2.96. So we essentially compared what we had on the books versus the spot price. Those price -- the final price we'll get on the pounds of copper is a function of the price over that entire 90-to-120-day period, so you're taking an average. We took a point in time, which was close to the low, and you're not seeing the spot price go back up so that average will climb. So the final price we get is function of, obviously the day of shipment and essentially the average spot price over that 90-to-120 days. So can see as the copper prices climb, we'll get the benefit, not only on sales in the quarter but that mark-to-market coming through from what was a receivable at the end of the quarter.

How many tons of con and copper were subject to that swing during the quarter in.

It was 174 million pounds that we marked. And we can get you some more detail, Dave, if you want to (inaudible) on the exact mechanics of the calculation. And it is one that can impact the results and is one that we need to maybe educate and provide a little more information to you guys on, because it is a big number at the end of the day and it swings pretty quickly depending on volatile spot prices.

And also in your reported $2.33 (inaudible) per pound received with Tisiasi, how much of that was Tisiasi?

It's all Tisiasi, so we paid the treatment charge and then our refining charge that's built in and that's been pretty consistent at the levels you've seen over the quarter over the last few years. We net that against revenue, so you don't actually see that as a cost. So if you look on page 45 of the Q, you can see we had for the quarter, $3.13 gross less the provisional we've been talking about as $0.62, gave us $2.51, and less treatment and refining charges of about $0.18 a pound. There's a fixed component of that then there's [a little] price participation piece at the function of the copper price and that's why you see it down over the previous year.

Okay. And in the earlier commentary, I think Brian had mentioned transitional ore in Yanacocha, I'm just wondering what the implications of that is going forward?

David, that was where they actually expected some oxide ore in the Yanacocha pit, which would have been projected to go onto the leach pad. The boundary, they encountered it a little bit higher up in the pit and the ore proved to be transitional, so we can't put that on the leach pad. And we do is we actually need to run that through the mill, so that ore's gone into the transitional stockpile and that will be processed through the mill in due course. So that was really just a -- more if you want to call it a one-off event that they were mining down through this last phase in the Yanacocha pit.

Will we see that, then, as potentially lower average grade going through the mill for the balance of the year?

No, we won't because that probably won't be processed this year. Our plan has us moving back over into [Chacicocha] and into El Capado where, if you recall, last year we did get some higher mill grade ores coming out of those two pits so we're expecting to see the mill grade hold up over the balance of the year as we've started move into those two pits for Q3 and Q4.

I think what it means, David, as Brian pointed out earlier it's slightly higher costs at Yanacocha because we had to, obviously, pay the mining costs to put this into inventory and -- or into stockpile and it didn't go into the pads. We're still anticipating we'll be within production and cost guidance at Yanacocha at a timing a little higher into the cost range.

Okay, thank you, Richard --

Sure.

-- and thank you, guys.

Our next question comes from Jorge Beristain. Your line is open.

Good morning, Richard and everybody. Again, congratulations on taking the leadership in the gold industry on raising dividends. My question was more to do with what you mentioned the start of the call about your in-house growth opportunities and you mentioned that Leeville, Conga, et cetera, could account for, if I caught this right, 45 million ounces of incremental gold proven and probable of which 30 million are booked, if I got that right, on your current PMB?

What I said was that those opportunities could collectively represent 30-to-45 million equity ounces of which 20 are in reserves today, that's correct.

All right, okay. And I was wondering of that increase of ten to possibly 25 million equity attributable ounces, what do you consider the timing on realizing some of those because a lot of them are basically brownfield expansions?

Yes, Jorge, this is Guy. Jorge, these projects are projected to be developed over the next four to five years so we're to progressively bring that into play over the next, say, two to four years here.

And I would say that I think, in particular, if you look at some of the projects, like Greater Leeville Turf, which is one of the ones where we have a pretty high expectation of both delivery, as well as one of the wider ranges of the projects we have, we are doing quite a bit there today in terms of putting some additional drilling in place. We -- as we talked about at investor day, we've authorized an additional $25 million of drilling to go into that project today, which, Guy, you might want to just describe a little bit more about what we're up to out there.

Yes, I can talk a bit more about Hope Bay -- sorry, Leeville. We've -- Leeville, as we've said in the past, we've had some really good results in terms of trying to understand the wing span, that horizontal extent of the deposit. And as we said, just to recap, in the past we see the potential to get up to six-million ounces of reserve in NRM. As Richard said, we've looked at putting another $25 million of funding into this because of the great success we've had earlier in the year and that would support 22 new surface holes, which would extend the project 3,500 meters or two miles north and about 1,000 meters east and west from the Leeville shaft. We've drilled six of the holes on the program, with the first three holes complete and the results are still pending. But a lot of excitement around Leeville and still trying to get our hands around what the bigger project looks like. While we're doing that, we're look at how to optimize this from a throughput perspective. Do we need more shafts, what's the best way to exploit the asset that we've got out there? So we're really excited about that one.

Yes. And that's a project which -- just to remind everybody, it's representative of the kinds of projects we're looking to drive higher returns. And in Nevada where we already have infrastructure for processing and these ounces would bring higher grade with them it helps us to extend the life of our Nevada reserves, which, as you know, if we can bring up the Nevada portfolio over people's expectation of the outward decline for Nevada, that brings up the whole foundation for the Company and there's a lot of good work with respect to costs that can happen as a result of higher grade deposits and the right chemistry, which Leeville provides us with out in Nevada.

And I guess just to build on the projects that sit in that 30-to-45 million ounces, we've got Conga and Akyem of which big portions are in reserve already. Gold Quarry, West Hole and Greater Leeville (inaudible) portions that in our reserve (inaudible), but those are where we'd expect to see developing more reserve and NRM over the next several years. The other bigger project is Hope Bay. Of course that's early stage and over the course, again, of the next few years we'd look at bringing them into NRM and reserve.

Sure. I'm just trying to dimension of the incremental -- what's not counted in reserves right now -- it would appear that you could pick up, if we assume,about a 25-year mine life, 400,000 to one million incremental annual ounces based on the in-house or excess reserve internally identified opportunities. Am I thinking about that correctly, the order of magnitude?

No. Jorge, it's Randy. No, really, when you look at the total mix there between what we have coming out of the Nevada portfolio and what we have out of Conga and Akyem and Hope Bay, collectively there's probably 1.5 to two million ounces of annual production across the entire devel -- advanced stage development portfolio. So when you're thinking -- when you're trying to break up out between what's in reserve and what's in resource, there will certainly be a conversion effort with a good chunk that conversion coming out of the ounces out of Hope Bay, as an example. But then over time those will work their way into arguably incremental additional ounces as time goes on. But out of the gate I think you should think about it in total as about 1.5 to two million ounces.

Okay. And to sorry just to keep questioning on Boddington, but just again, big picture, conceptually Boddington in this current quarter was annualizing production at around 736,000 ounces. Your guidance, even though reduced for 2011, still implies a range of 775,000 as a mid-point, at least 5% higher, maybe 10% higher at the outside guidance range. What is it that you're pre-preparing for that would cause you to not expect significant fixed-cost dilution as you are able to optimize your production in that year. Are you pre-bracing for further issues, for example, the Australian exchange rate or energy, or do you believe that you're leaving a bit of padding in the latest guidance that costs could surprise to the downside?

Well, look, we're giving you our best estimate for today. It's a wider range because it's next year. We're only 2% into this. I tell you, we've given you what we think is our best estimate, but as Brian has said, we're going to work hard, particularly in the mine, to see what we can do to reduce dilution in the processing plant to increase (inaudible) nameplate capacity. And I would say if you think a $0.90 exchange rate over the last several years and $80 oil is an appropriate assumption, that's what we've assumed. If you think it could be less than that -- and there are certainly things we could do today to make yet be less than that if we wanted to hedge part of our -- or further hedge part of our exposure we could probably bring that cost level down on some of those fixed costs.

Great, thank you.

Thank you. Our next question comes from David Christie. Your line is open.

Hi, guys, not to beat this with a pole here, but just on the Boddington a little more granularity for me, maybe. On the modeled grade versus what you're actually getting there, could you give me what the difference is between the two?

We've said that we have a 12% effective difference on gold from a contained gold perspective and 23% difference increase on the copper grade. That's -- overall, if you look at the ore that we've mined to date, the grade itself has reduced on the gold front from between 10% to 15%.

Okay, that is good. And you have those high-grade stringers in there, how often are you not seeing them when you expect to see them?

David, what we're seeing is we are seeing the high-grade stringers, but so far, with the relatively small amount of tonnage that we've mined what we're not seeing is the level of continuity that we had expected to see so that's really what the issue is, is on the higher grade the model would've projected more continuity on the high-grade stringers. When we actually get in and drill them down to ore control spacings for blast holes we're just not seeing the same level of continuity. But that doesn't mean that we may not see it come back again in the future, but that's just what we've experienced so far.

The previous -- the reserves drilling was done at what kind of spacing?

I think it's 50 by -- .

50 meters by 50-meters is the reserve drilling spacing.

So that's not uncommon to find things [aren't, of course, continuous] on a 50-meter block on stringer zones. Okay, that is good. And what's the grade rate now in July? Can you give me what the grade is right now.

I believe we're running at a gram per ton the first three weeks into July, David.

And what were you hoping for?

Again, just that difference that Guy and others have spoken to

So it's still there?

In the 15% range.

Okay, perfect. And at Yanacocha, you talked about it a bit already, so it's just basically higher grades coming from those -- the couple of pits you were talking about there?

That's right. We're moving into those pits in the second half of this year and that's traditionally where we've experienced higher mill ore grades and that's what our expectation is over the second half of the year.

Okay, so the second half of the year. What should the grade difference be between H-1 and H-2?

It depends, really, on that mix because of leach to mill, but we expect to see -- we normally run the mill -- the mill ore grades are running in the three-to-four gram per ton range. When we move into the other pits, what we've historically seen is running more in the range of five.

Okay, so that's a pretty good change, okay. And the leach side of it, is that just more tons?

Sorry?

The pad part of it, it's just more tons.

Yes, the leach side would just be more tonnage.

Okay. And what percentage increase are we talking about?

Not a very significant increase because that's really been planned out on about the same basis in each quarter this year. We're not experiencing a significant increase in leach tonnage place. It's fairly evenly spread over the year. Most of it will come from getting higher grade and, as we continue to debottleneck the mill, more tonnage through the mill.

So it's more of a mill thing. Okay, perfect. That's about it. Thank you.

Thank you. Our last question comes from Heather Douglas. Your line is open. Heather, your line is open.

Can you hear me?

We can, now.

Your line is open.

Hello?

Yes, we can hear you now, Heather. Go ahead.

Okay, sorry about that. I promise not to ask a question on Boddington, so just one question. Last week on -- with the new financial regulations in the US, I think there's also a part [on disclosure] about companies who list in the US that operate in other countries. Can you give us a little bit of an overview of how this will or will not impact Newmont?

Yes, Heather, it's Russ. Congrats on the new job, by the way. We've been following that through our DC office and it's really de minimus. There's some additional reporting requirements, not only on gold but on a lot of the base metals, particularly around the DRC, those surrounding countries. Not an issue for us. We already essentially publish what we pay so we actually welcome it -- the transparency. So in this case we're for some more legislation, quite frankly.

Okay, great. And then just a quick question on -- can you give us an update on some of the activities ongoing at Hope Bay?

Yes, Heather, this is Guy, I can give you a quick update. We're currently on track with our sealift, big focus on the sealift that comprises 12 barges, six tags and three ships. We've got about 22 million liters of fuel and 20,000 tons of cargo, which is on schedule to arrive at Robert's Bay in August-September so we're going to have a very busy time up there. In addition to that, key contracts are in place for the decline, which we anticipate starting later in the year, as well as the infrastructure construction, so that includes roads and camps. We've also completed 42 kilometers of drilling and we'll continue to update our models and advance our studies. So overall we are happy with the progress the project is making and we're looking forward to making good progress as we go forward here.

Good, thank you.

Okay, thank you all very much for attending today and for accommodating our change in schedule. So we appreciate your attention and look forward to talking to you again either before or at the next quarter end. So thanks again and have a great day, everybody.

Thank you. That concludes today's conference, you may disconnect at this time.