紐蒙特黃金公司 (NEM) 2010 Q3 法說會逐字稿

Thank you for standing by. (Operator Instructions) I would now like to turn the call over to John Seaberg, President of Investor Relations for Newmont Mining Corporation. Sir, you may begin.

Thank you, operator. Good morning and thanks for joining us on our third-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 to refer you to our cautionary statement on slide two as we will be discussing forward-looking information which is subject to a number of risks, certain of which are unique to our business. As further described in our SEC filing which can be found on our website at Newmont.com. And now I will turn the call over to Richard O'Brien our President and Chief Executive Officer.

Thanks John. For those of you with access to our webcast presentation, we'll start on slide three.

If you have been following Newmont recently the themes of execution, cash flow, flexibility, margin expansion and leadership will sound very familiar to you. That's by design, as we believe consistent delivery creates sustainable value.

Our consistent focus on production and cost management applied across our portfolio of assets gives us the ability to deliver the most cash flow leverage per share of any gold company in the world. That cash flow in turn gives us the flexibility to fund exploration. By far, the cheapest source of new reserve growth. And to fund our considerable project development pipeline with an expectation of favorable real returns. And our free-cash flow generation provides us the confidence to return capital to shareholders as evidence by our 50% increase in our dividend announced in the last quarter and sustained this quarter.

While we continue to focus on optimizing the results from each of our existing operations, we are also transitioning our Boddington project through ramp up and into steady state operations. During third quarter, we strengthened our senior management team at Boddington to support this transition. And we are now forming a special project team to optimize and debottleneck the mine and process plant as we complete that transition into ongoing operations.

An initial component of this optimization process has been the installation of a sixth MP 1000 secondary crusher which will be commissioned this month.

As a 20 year plus asset with compelling exploration potential, our expectations for Boddington continue to be high. Alongside of optimizing our existing operations and transitioning Boddington to full capacity, we are also simultaneously preparing for our next significant project development campaign, which includes Conga and Peru, Akyem and Ghana, Hope Bay in the Canadian Arctic and several near mine development opportunities in the Carlin trend in Nevada.

Moving to slide four, you will see a snapshot of our global production in the third quarter. Newmont produced 1.4 million equity ounces of gold at an average realized price of $1221 per ounce and cost applicable to sales of $477 per ounce.

Our North American region contributed 35% of our total quarterly equity gold production, South America contributed 13%, and Africa it contributed 11%. Our Asia Pacific region contributed the remaining 41% of our quarterly gold production and all of our 83 million pounds of equity copper production.

Within our AIPAC region our newest mine, Boddington, produced 180 thousand ounces of gold and 14 million pounds of copper in the quarter. With the first three quarters of the year behind us, we have narrowed our overall outlook for 2010 equity gold and copper production to 5.3 million ounces to 5.4 million ounces for the year. We have also reduced our 2010 capital spending outlook by about $100 million, to $1.3 billion to $1.5 billion.

And as we suggested in our July earnings call, higher gold prices and unfavorable exchange ratios have led to higher cost in the third quarter. We have expanded our outlook for gold costs applicable to sales to a range of $485 to $500 per ounce for 2010, still below the gold industry average and highly influenced by higher gold and a higher Australian dollar rate.

You can find more details on our 2010 outlook in the appendix to this presentation.

I'd like to now turn the president presentation over to our Chief Financial Officer, Russell Ball, to fill you in with more details on our financial performance.

Thanks Richard. Slide five summarizes our third-quarter performance compared to the prior year quarter. We recognized record revenue of $2.6 billion on higher equity gold and copper production, an average net realized prices of $1221 an ounce and $3.67 a pound respectively. Looking at the screens earlier this morning we were trading at $1356 and $3.80, so significantly higher than the average is realized for the third quarter.

With significantly higher operating margins, we reported adjusted net income for the third quarter of $1.08 a share an increase of 37% from the year ago quarter and some $0.10 to $0.12 above consensus. Reported net income was slightly higher than the adjusted net income, due to a small net gain on an asset disposition, which we backed down.

I didn't want to ignore the two red arrows on the slide, namely costs applicable to sales for both gold and copper, which were up 18% and 46% respectively and we'll cover this in more detail on slide seven.

When you look at industry wide cost trends as reflected on slide six, you will see that while we are fairing better than the industry average, we are all experiencing upward cost pressures as mines age, the complexities of the ores we treat increases, and average ore grades decrease.

On the slide Newmont's cost applicable to sales are shown in blue and are compared against the GMFS -- GFMS sorry, average in gray. Our third-quarter CAS of $477 an ounce is below the GFMS average of $535 per ounce for the second quarter, the most recent available. And will undoubtedly be well below the average for the third quarter when all producers have reported. The 61% operating margin for the third quarter, the highest in recent memory, although this will likely be eclipsed in the fourth quarter given the way the metal prices are trading today.

On slide seven, we have highlighted our cost applicable to sales outlook from February 2010 to where we stand today. Our original guidance as Richard mentioned earlier was based on a $900 gold price and $80 Australian dollar exchange rate assumption. The higher realized gold price and stronger Australian dollar, or maybe that should be a weaker US dollar in today's context, collectively added about $19 an ounce to operating costs, but as I said on the second quarter call, these are higher operating costs we don't mind paying given the increase in margin.

Lower production volumes and higher spending, primarily at Boddington and Batu Hijau contributed another $11 per ounce and higher costs. Our copper CAS outlook remains unchanged at $0.85 to $0.95 per pound. With lower production costs from Batu Hijau offset by higher costs from Boddington.

Slide eight focuses on free cash flow generation as we believe that this metric is the ultimate determinant of value for this and any other business. We delivered operating cash flow in excess of $850 million for the quarter and this was after funding pension obligations in the amount of approximately $60 million and $130 million pre-payment of income taxes which we expect to be refunded next year.

I should note that included in operating cash flow for the third quarter of 2009 was $175 million of income tax refund.

So in summary strong operating cash flow generation put some big working capital movements that aren't always easy to forecast.

The chart on the right reflects third-quarter operating cash flow as reported on a per share metric for a number of our North American peers. The numbers speak for themselves. And with that I will turn it over to Brian Hill, our Executive Vice President of Operations to discuss the regional operating results for the quarter.

Thanks Russell. As you can see on slide nine, North America produced 495,000 ounces of gold in the third quarter. Production was lower than the year ago quarter as a result of lower leached tons in placed at Twin Creeks and Carlin and lower ore feed at Mill 5 due to the gold quarry slide that occurred in late 2009.

On a positive note, we experienced higher mine production at Leeville which offset some of the impact of gold quarry. We saw production increases at La Herradura which benefited from the commencement of production at the Soledad and Dipolos pits. Costs applicable to sales in North America were $565 per ounce, due to a higher proportion of underground mining and additional surface mining costs due to the gold quarry slide, partially offset by copper and silver byproduct credits.

Twin Creeks cost per ton was unfavorably impacted by the timing of leached ore placed at the end of 2009, and additionally mining optimization work at Twin Creeks has focused on accelerating mill ore as opposed to leach ore to help offset the gold quarry slide.

In South America, we produced 187,000 equity ounces, a decrease of 33% as expected from the prior-year quarter as shown on slide 10. Production included contributions from Chaquicocha, which partially offset lower placed ore from La Quinua where [palilia] soils limited our leach ore placements.

Costs applicable to sales were $420 per ounce up 43% 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. This was partially offset by favorable silver byproduct credits.

In the third quarter, commercial production began at our La Zanja joint venture with Buenaventura who is the operator. La Zanja is located about 40 miles west of Yanacocha and is expected to produce 15,000 equity ounces in 2010.

Turning to slide 11 in the Asia-Pacific region we produced 570,000 equity ounces of gold at costs applicable to sales of $451 per ounce. At Batu Hijau we encountered a dry season that was uncharacteristically wet, affecting our access to the bottom of the pit or in the third quarter. On a positive note, we experienced higher grades and recoveries at KCGM as positive mill reconciliations for July and August were coupled with good grades from their reward ore body.

We also experienced solid overall performance at Jundee and Waihi. Costs moved upwards in the third quarter due to higher drilling loading and hauling cost at Boddington as well as higher proportion of underground mine operating development cost at Jundee.

Moving to slide 12, we continue to work towards consistent production at Boddington. While we report Boddington as part of our Asia Pacific region we thought it would be helpful to also understand its contribution on a standalone basis relative to the rest of our portfolio.

For the third quarter, gold production was 180,000 ounces, virtually unchanged from Q2 and copper production was 14 million pounds. We did have issues with the main circuit breaker and tailings thickener in August, which did adversely impact mill through put during the quarter.

Since the end of the quarter, we had a good October at Boddington with 2.8 million tons milled. Our processing plant continues to perform in line with our expectations, and should achieve name plate capacity in the first quarter of 2011.

As I mentioned earlier in my Asia Pacific remarks, costs applicable to sales have been higher than anticipated due to a stronger Australian dollar and higher than expected mining and milling costs during the ramp-up.

Let's turn to the slide 13. On the positive side, we continue to see solid performance from the high-pressure grinding rolls and wet plant at Boddington. While recoveries and concentrate quality continue to be better than expected. Our challenges still involve lower gold grades, though that is based on less than 3% of reserves mined to date, dry plant wear rates and higher mining costs as a result of fragmentation issues and a stronger Australian dollar.

Turning to slide 14, I would like to discuss Batu Hijau briefly which is another component of our Asia Pacific region. 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. We have reached an accord on price with the central government and it is important to point out that the final settlement price will be net of dividends paid in 2010.

With regards to operations, we experienced unseasonably heavy rainfall in the third quarter limiting our access to the bottom of the pit and requiring us to have higher than expected production from lower grade stockpiles. We had a dry October, which has allowed us to extend Phase 5 mining through October as the rains have held off. We typically plan to be out of the bottom of the pit by October 15, so any production we derive from the pit of them beyond this date is a bonus.

For the balance of the year, ore grades at Batu Hijau are expected to move lower when we suspend mining at the bottom of Phase 5 and begin processing ore from stockpiles as mining will be primarily for Phase 6 waste removal. We expect Phase 6 ore to become the primary ore feed commencing in 2014.

On the expansion front, Indonesia's Forestry Minister approved the permitting of another 198 hectares at Batu Hijau. This permit was issued a few weeks ago and is valid until April 2025. It's important for operations moving forward as it allows for waste dump expansion into the newly permitted area starting in the second quarter of 2011.

Moving to slide 15, our Africa region had a solid quarter, producing 156,000 ounces, up slightly from the same quarter in 2009 due to higher grades and recoveries as we mined higher grade ore from the [Opensuse] pit. We also had a small contribution to our production total from the Amoma pit in the third quarter which started up ahead of schedule. Costs applicable to sales decreased 5% to $422 per ounce due to higher production partially offset by higher diesel and royalty cost. I'll now turn the call back over to Richard.

Thanks Brian and Russell. I'd like to now shift our focus from the quarter to the future. We have a number of exciting projects that will over the next several years bring reserves and resources into productive capacity, extending our mine life and providing incremental gold and copper exposure to our investors. Normally, Guy Lansdown are EVP of discovery and development we cover the section, but he is in Ghana at the moment so I am going to take this over.

Africa is our fastest growing region where we have three projects underway in addition to our existing operations at Ahafo. The first project is Akyem which is expected to double our current annual production in Africa. We believe it has a potential for eight million to nine million ounces of gold.

After some additional drilling -- in-fill drilling, in the first half of the year, we've refined our view of the ore body and completed our metallurgical test work. We provided further updates on slide 17. And as you can see we are advancing towards completion of detailed engineering by the end of 2010 and expect a full funds decision in the first half of 2011. We're also in the process of developing mine planning and processing options with a goal of production startup in late 2013 to early 2014.

Moving to slides 18 and 19, you'll see a picture of our underground decline at Subika. Which is another compelling gross story within Newmont's Africa region and in fact within our Ahafo operation. The ore body is open at depth and strike, with the current potential estimate of nine million gold ounces. Work continues to advance on the decline, which is currently at approximately 1050 meters.

As you'll see on slides 20 and 21, we continue to advance our iron ore project at Nimba, where we are in a joint venture with BHP Billiton. We estimate there is current potential for up to 1.3 billion tons of iron ore at Nimba. We're advancing mining and transport agreements with the local governments and also implementing environmental and social responsibility programs. We expect to begin a prefeasibility study by mid-2011.

Turning to slides 22 and 23 at Conga in Peru. We've recently approval for our environmental impact assessment. Construction planning is underway supporting our efforts to extend the region's life for decades to come. With current potential at 15 million to 20 million gold ounces and four million to six million pounds of copper, Conga is one of our most compelling new projects, offering a longer-term productive capacity and creating a bridge to other potential projects and opportunities at our existing Yanacocha facility and within this burgeoning mining district.

At Conga we have procured mill engineering, camp buildings and treatment plants. Community relations and environmental work continues to strengthen our long-term relationships in the region.

We've also made significant progress at Hope Bay this year. Our 2010 drilling program was completed on schedule and on budget the Doris North portal has been collared and the decline initiated as demonstrated in the picture on slide 24. A massive Sealift was successfully completed in late summer and we're well provisioned for the next two years there. We believe the current potential at Hope Bay is up to nine million ounces of gold as seen on slide 25.

I'll round out my discussion on our growth projects with the most recent development. In late September we received our expiration permits at Elang, in Indonesia, and on slide's 26 and 27 you get a glimpse of the potentials size and scope of this opportunity. As some of you may know, Elang is located about 60 km east of Batu Hijau and is covered under the same contract of work. Now, with the permits in hand we're anxious to resume our resource definition drilling in June of 2011, when the dry season returns.

Our previous exploration results and our preliminary scoping study suggests that Elang is a substantial opportunity. With a deposit that could ultimately exceed the size of Batu Hijau, which contained about 19 million ounces of gold and 18 million pounds of copper in reserves and NRM. Although it's still early in the development process we're excited about this significant copper and gold opportunity in Indonesia.

Turning to slide 28, you'll see that Newmont is well-positioned to support these growth projects and to support our future. Our balance sheet continues to strengthen with nearly $7 billion in total available liquidity as of September 30. Our financial position enables us to be involved when we want to be involved, to look both externally and to develop growth projects internally and still return cash to shareholders. As evidenced by the 50% increase to our quarterly dividend announced on July 28.

Over the next few quarters we plan to fund development of our Conga, Akyem and Hope Bay projects as well as continue our development of Nevada growth projects around Leeville and Gold Quarry. All of these from our existing liquidity.

In addition, we took the opportunity in the third quarter to show up our pension funding and we are to be nearly fully funded by the end of the fourth quarter, entirely from existing liquidity.

We look forward to providing our full-year 2011 outlook in the first quarter next year and our investor day in April. We also plan to update the market on the progress of our major projects at Conga and Akyem, as we move towards full funding approvals in the first half of 2011. I'll conclude on slide 29 by highlighting that Newmont is consistently generating industry-leading cash flow in this strong metals price environment.

Our financial results emphasize that our business captures the full cost of production not just cash cost but, cash cost plus sustaining a new project capital. Allowing us to develop compelling new growth opportunities in best opportunistically and return capital to shareholders, while providing opportunities for our employees and the host communities where we operate.

As a management team it's our goal to consistently deliver those results while providing a compelling investment opportunity. 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 from JPMorgan, your line is open.

Hi, good morning Richard, everybody.

Hi, John.

Hi. I just wondered -- we got used to the idea of Newmont fourth quarter being the strongest one of the year and you've got this, what may be a conservative guidance number. You point to grades at Boddington being stronger in September. Have you got any color for us on what happened in October?

I'll let Brian answer that.

John, it's Brian. We were pretty much in line with the forecast that we had expected for October. I think September -- we look at September that was a month where we did see higher grades. And I think as we go through this continual ramp-up process where we're still reasonably high in the ore body, we're going to see some of those swings and roundabouts. But October was pretty well in line with what our forecast had projected.

And that's based upon the slow buildup to the design grade?

That's correct and to through-put.

Okay, okay. And Batu Hijau, you are still in the bottom of the pit?

Yes, we are. We're still in the bottom of the pit, so we are about almost 3 weeks beyond our expected date of exiting the bottom. So as I mentioned earlier it brings a significant boost to us for everyday we can stay in the bottom beyond October 15.

What's the weather forecast for the next couple of weeks?

I would say probably raining, so we'll hope people keep doing the no rain dance.

Okay. Well, congratulations on the great results, and I will hold my thumbs for a bump for the fourth quarter. Thanks a lot guys, well done.

Thanks, John. Thanks for the question.

Thank you. Our next question comes from David Haughton from BMO, your line is open.

Yes, good morning and thank you. I'll just follow-on with those Batu Hijau questions. Given that you have got additional stockpile ore coming in through fourth quarter and not likely to remain at the bottom of the pit for a while, what sort of grade should we be thinking about going into the balance of the quarter, and also into next year given that you will be focusing on some stripping?

I actually don't have the stockpile grades David, but we'll get John and the team to get those out to you. All we can tell you is it's going to be not as good as what we see in the main part of the pit, when we're in the bottom of the pit, and we'll be into that grade for the next several years as we work to get through the pre-strip for getting down into phase 6.

And once you're in phase 6 Richard, what sort of grades would you expect to see there?

David, it's Brian, we'll see the grades come back to where we are with being in the bottom of phase 5. Essentially, as I mentioned, that will come back around 2014 or so when we get down to the bottom of the pit again. It's one of the issues that came with the delay in the Pinjam Pakai and not being able to get the phase 6 stripping started when we wanted to. It's got us a little bit out of sequence.

All right. Now just thinking about Elang, is it -- is you're thinking here about a stand-alone operation or more as a satellite feed for Batu Hijau?

I think it's open to look at all possibilities, but I think the preferred option for us to consider would be to look at -- we've got significant infrastructure that exists at the Batu Hijau operation, and it would be for us to look at how we can best capitalize on that infrastructure that we have, particularly with just looking at doing a mill expansion at Batu where it could potentially support the addition of another sag mill.

And we've already got a slot for a third sag mill to be put in place.

Yes.

All right. And the ownership structure is the same as what you've got for Batu Hijau?

Yes it is, it's covered under the same contract of work

And if you were to commit capital to its development, will the shareholders contribute pro rata or is there some other arrangement that your thinking about?

Yes, David it's for us. We would look at doing some project financing, but the shareholders would be required to fund pro rata or risk dilution.

Okay to other projects, Subika what do you expect to be your startup for underground production there?

Let me ask Cindy to try to answer that.

We anticipate that production at Subika will start likely in the 2012, 2013 timeframe, assuming that test (inaudible) goes as planned. And that, that'll bring on in the range of 150 thousand to 200 thousand incremental ounces at the Ahafo operation.

And the sort of capital required to get that up and running? What are we looking at there?

Ballpark in the $200 million to $300 million range. Dominantly comprised of underground drift development.

All right. Well, thank you very much that concludes my questions for now.

Thanks David.

Thank you, our next question comes from David Christie Scotia Capital your line is open.

Good morning guys. Just while we're still talking about Subika, when will you make a decision there to start spending the big money?

We're advancing this underground every day, and I think we are looking at good ground conditions. At this point we don't seem to be facing some of the water issues that we anticipated that would slow us down. So we are actually ahead of schedule, which is a good thing.

So I would anticipate sometime in mid-next year we'll be making a decision about how we push this forward. At this point I'd say it looks very favorable in terms of the conditions. We are stockpiling ore and we are getting ready to see how that ore will go to the mill, and just get a view of what comes out. So, we've still got some preliminary work to do but at this point it all looks pretty favorable.

Okay good. On things like Nimba, are you spending much money there?

Yes, we've spent some money this year on some of the community development. In particular as we remediate some of the drill sites and make sure we keep up our environmental and community impacts in the right way. Next year will be a significant increase for us as we start to move forward and commit, I'd say somewhere in the $40 million to $50 million of our share as we start moving forward to progress this.

It's a very keenly located site for iron ore production, really targeted for that European market. And so I think it's favorably located. The biggest thing for us is getting the infrastructure right to make sure that we can get the ore out at a favorable rate and get it to a port. And I think all of that is work that Guy and Cindy on the development team are working very closely with the HP on.

The money will be destined as I said, largely to do study work and to make sure that we are working with the government and the communities hand in hand, in this way to make sure that that site is developed appropriately.

So you guys are sort of committed to pushing this thing forward and staying involved. Is that what I'm getting from this?

Absolutely. This we think is one of the highest returning projects and our portfolio. It helps to bring us a further blend of production. And while it's a longer-term project, I believe that many years from now people will look back on this as a very cash flow positive investment for the company, which provides us additional flexibility in our portfolio.

Okay, and I didn't really get a sense of where we are towards production there or towards making that kind of decision what is --?

Let me just say that I think at this point we have set ourselves up for continuing our advanced exploration work there. And now with the decline going in and with the ice buildup over the next couple of months, you can expect us to start talking some more about exploration result, and as we drive drift to get a better assessment of what the size of this project could be.

I don't want to just limit it to Doris North though, because I think the big thing we are working on is to reach out into that district, which as we've talked about before is significant greenstone district. So you can expect us to continue on both hands drive the drift, see what's underground, continue to do advanced exploration.

We don't have a particular target for production today that I'd be comfortable giving you. What I can tell you though is everyday we're up there we get to know the district better. We still appreciate this as a world-class the district and we'll talk more about development as we drive, drift and continue the exploration work.

Okay, fair enough. And on Elang you talked about 116 drill holes there. What kind of grades were we getting out of those holes, and what kind of widths?

Again, I don't have that data today. It's something that we can provide you --

Yes, David I can get back to you on that. I think what we can say is it looks at this point early on it's bigger than Batu, but lower grade. But it's still early days but we'll get whatever information we can provide.

Okay, perfect. Thanks guys.

Thank you. (Operator Instructions)

Okay. Well thank you operator. If there's no more questions, thank you for listening, and appreciate it --

Actually Sir, I apologize we do have a question. David Christie from Scotia Capital your line is open.

I can't let you guys get away that quickly. Just one more question on Boddington. On the gold grades there, when do expect that we are going to see them reconcile better with what we had in drill holes?

David it's Brian. To some give you a bit of a history of what we've been doing. We have actually been refining our modeling assumptions and the methodology that we have been using to generate our production planning model. We think we're at a point where we've got much better reconciliation point between the model and production as we look across a number of the different domains.

So that's basically going to become the modeling assumptions around which we are planning our 2011 business plan. And we will be coming back to you in February when we come back with guidance next year for 2011 on Boddington. What we have been trying to do is use the sample set that we now get out of production and helping us to sort of reconcile that with modelings, we end up with a better modeling approach going forward.

I just have one final point on this which is, when we put this mine plan to gather we actually planned for higher grades in the first five years and then grades would be declining to a lower mine grade average over the remaining 15 years of production.

At the same time, we continue to believe in the district I think it's important to note that overall the grades that we are realizing in the first 3% really correspond with longer-term rates that we believe for gold grade. So what we are really experiencing as Brian said is these higher pockets of ore grade that we are anticipating in the first five years and trying to make sure that we can get those out, and we will as Brian said come back to you.

I want to just emphasize though that over the long-term we do expect that gold grades will still be at the mine average that we had anticipated for a longer period of time.

Okay thanks.

Thank you. Our next question comes from Wilfredo Ortiz from Deutsche Bank. Your line is open.

Yes, good morning. I know you mentioned that in February you're going to be reiterating your guidance. However in the previous quarter you have sort of mentioned that for Boddington you were expecting for 2011 to reach between 850 thousand to 925 thousand ounces. How do you stand compared to the results you're now getting in September, October versus that prior guidance provided?

Again we will provide guidance for the whole portfolio in February, and at this point that's where we stand.

Okay.

Thank you. Our next question comes from George Topping from Stiefel, your line is open.

Thank you operator. A question on Elang. Previously there has been local unrest there that resulted in the camp being burnt down back in 2006. Can you give us an update on the local politics, as it stands currently?

Yes. I'll just tell you in general in Indonesia, we have seen, I think since the arbitration ruling in early 2007, we have worked hand-in-hand -- or sorry 2009, sorry -- since that arbitration decision we, I think have worked hand-in-hand with the government to ensure that the arbitration proceeding is enacted in a way that the arbitrators foresaw, which means we had to work closely with the government. I think the disposition process has gone very well, and I think in general the relations with the central and regional governments have improved.

As a result of that, I think that we see support for the local exploration. Although we won't know till we get on-site at what I would tell you is we wouldn't get the exploration permit or move on there unless we felt that we would get favorable support from the (inaudible) from the people in the communities.

I think people everywhere in the world today are looking for great job opportunities, and I think this is one of those. Where long-term production capability within that contract of work really just assures that we will continue to be part of that community and the fabric of the government for some time.

I see. And have there been polls taken among the local population? I am just wondering what lies behind that. Whether it's a topdown approach or whether you have people on site that have this feedback for you.

George, it's Russ. Maybe just adding to Richards comments, I think two other developments that have helped. As you are aware in the divestiture process says local governments have an ownership interest in Batu Hijau through the PGDMV stakes, so I'd say that there is far greater alignment and common are interested the ownership equity level.

In addition, the [copper parton] of Sumbawa is broken up into two districts and the one-way Batu Hijau is, has seen the economic benefits, Elang is in a different copper parton and the local government is very keen to attract the investment. I would submit that some of the unrest back in 2005 timeframe was related to the impending divestiture. And as Richard said we have worked through that process we have alignment while never in total agreement with the local governments and we have their support particularly at the regional level. But to Richard's point, we are planning to be on the ground next year and that will be the test.

I see, thank you.

Thank you.

Thank you for participating in today's conference. I would now like to turn the call back over to Richard O'Brien, President and CEO.

Thanks everybody for joining us today, and we look forward to seeing you in the near future.

Thank you that concludes today's conference. You may disconnect at this time.