紐蒙特黃金公司 (NEM) 2011 Q1 法說會逐字稿

Good morning, and welcome to Newmont Mining first quarter and earnings conference call. All lines will be on listen-only until we open for question-and-answer. Today's conference is being recorded. If anyone has objections, please disconnect at this time. I'd now like to turn the call over to John Seaberg, Vice President of Investor Relations for Newmont Mining Corporation. Thank you, sir, you may begin.

Thank you, operator and good morning everyone. Thank you for joining us on our first quarter 2011 earnings call. With me today are the members of our Executive leadership team who will be available for questions at the end of the presentation. Before we get started, 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 as further described in our SEC filings which can filed -- sorry, which can be found on our website at Newmont.com. Now, I'll turn the call over to Richard O'Brien, our President and Chief Executive Officer.

Thanks, John. For those of you on the webcast, we'll begin on slide three. First of all, I want to thank all of you who attended our Investor Day two weeks ago, either in person or via the webcast. We've gotten a lot of positive and constructive feedback from the investment community on our approach to deliver growth with good returns. Specifically at Investor Day, we announced plans to grow from our current outlook of 5.1 million to 5.3 million ounces of gold production for 2011, to approximately 7 million ounces of annual production by 2017. And, that is a 35% growth net of decline, while simultaneously returning capital to shareholders to enhance their exposure to gold price. We've also heard that you want more color on our gold price-link dividend, and on the timing of our production from our projects in our growth plan. We plan on covering both of those in our call today.

In addition to that, we'll provide highlights for our first quarter results. And, our first quarter results were very solid with the benefit of robust gold and copper price environment, combined with strong operating results. We continue to have a rock solid balance sheet and the potential to generate significant additional cash flow. This, combined with the commitment and enthusiasm of our workforce across the globe, gives me confidence that we will deliver on our growth plan. And, now to recap our first quarter performance, I'll turn the call over to our Chief Financial Officer, Russell Ball.

Thanks, Richard, good morning, all. Turning to slide four. As you can see, we had another strong quarter due to a combination of our continued focus on safe execution and delivery and strong metal prices, gold in particular. A few highlights from the quarter. We realized an average gold price of $1,382 an ounce and while the record is approximately $115 below current spot prices, we generated record operating cash flow of almost $1 billion, a 36% increase over last year and a 25% increase in gold price. It is clear to me that the Company-wide focus on operational execution and delivery is being driven to the bottom line in an environment of expanding margins as reflected in the operating cash flow for the quarter. Attributable gold production was 1.3 million ounces similar to last year and slightly ahead of our budget for the first quarter. Attributable copper production decreased to 57 million pounds driven by lower production at Batu Hijau in Indonesia as we strip for Phase 6 and process lower grade stockpiles. We should access Phase 6 ore in late 2013. Copper production was, however, ahead of budget for the quarter.

As far as the bottom line, there was essentially no difference between reported net income and our adjusted net income figures shown on the slide of $513 million or $1.04 a share. A really clean quarter from an income statement prospective. Continuing on slide five, revenue for the quarter was up 10% to $2.5 billion, on the cost side cost applicable to sales were up 17% and 42% respectively with higher copper operating costs driven by lower production at Batu Hijau, as previously mentioned. On gold operating costs, starting this quarter, we have added two non-GAAP metrics that we think will provide investors with a different perspective on our cost structure, and one likely more comparable to our peers. The first is attributable CAS which represents the operating cost per ounce for Newmont's attributable gold ounces produced so we eliminate the ounces and costs that are included in our consolidated financial statements, that are ultimately for the count of the non-controlling shareholders largely at Yanacocha and Batu Hijau. Attributable CAS for the quarter was $562 an ounce, or roughly $5 an ounce higher than the consolidated CAS number that historically we have reported. The second is net attributable CAS, where we take the attributable CAS number I just covered and then treat our copper co-product revenue as a credit to operating costs. Net attributable CAS for the quarter was $438 an ounce. As I said, both of these are non-GAAP measures but I believe they are important for investors to understand, particularly when comparing costs across the sector. The reconciliation of these non-GAAP measures is provided in the appendix on slides 24 and 25. One last point on costs, I'd like to remind you that we will continue to report US GAAP operating costs which result in us being required to expend significantly more costs than we would under IFRS accounting. Our estimate for 2011 is in the order of about $40 an ounce.

Moving to slide six, we have included the GFMS 2010 industry cost drivers to provide some additional perspective on industry-wide costs. From 2009 to 2010, average cash costs increased 17% driven by the factors highlighted on the chart. I would submit that the cost drivers for 2011 are not going to be too much different from what you see here and I think we will be looking at industry-wide operating costs of around $650 an ounce for 2011. Interestingly, our first quarter CAS of $557 an ounce is equal to the industry average for last year. I have no doubt that our relative position on the cost curve will improve in 2011. Moving to slide seven, our gold operating margin continues to expands at a greater rate than the gold price. I like what we saw in the early years of this bull market when operating and capital cost increases outran the gold price. If you take the midpoint of our cost guidance for 2011 and the current spot price of gold, you will see continued margin expansion likely for the balance of the year.

Turning to slide eight, as mentioned previously, strong operating cash flow for the quarter, combined with a strong balance sheet at the beginning of the year, resulted in the liquidity picture reflected on the right-hand side of the slide. On a consolidated basis, we reported $4.5 billion in cash and cash equivalents. $1.8 billion in marketable securities and undrawn capacity of approximately $1.8 billion under our corporate revolver. Subsequent to quarter-end, we completed the acquisition of Fronteer Gold and utilized approximately $2.25 billion in cash, which left us with still in excess of $2 billion on the balance sheet. I will talk about returning additional cash to shareholders shortly, but, first, a few thoughts on gold with spot prices near an all-time high, at least on a nominal basis. I've included on slide nine Martin Murenbeeld's most recent summary slides on the gold market. For those who don't subscribe to Martin's work, I really believe you are missing out on the complete and accurate coverage of the gold market. For some history, Martin hasn't always been bullish on gold. In fact, was very bearish in the late 1990s as producers hedged, central banks sold and the US dollar reined supreme. Martin turned bullish in 2001 and for those who have been following his work, has been uncannily accurate in his forecasts since then. You can see Martin's bullish and bearish arguments for gold in this slide. I won't go into them in any detail as we clearly don't have time on this call. In short, Martin remains bullish and has a probability weighted forecast of $1,546 for the end of 2011, and an average price of $1,573 for 2012. Although, as you can see on the bottom of the slide, he makes the point that he makes no allowances for geopolitics in his forecasts.

On slide 10, you will see GFMSs forecast for 2011, albeit with a slightly less bullish average of $1,455 but interestingly, a very wide range of up to $1,620 an ounce. Finally, I've included a quote from Dennis Gartman's research note from Tuesday this week. I think it very succinctly sums up the current gold market where Dennis notes that gold trades no longer as commodity but as a currency. We concur. We are bullish. And, as outlined in our Investor Day in New York on April 7, we are going to invest accordingly. At that same Analysts Day, we announced our gold price-linked dividend which is summarized on slide 11. In short, we believe that we have an obligation to share the significant cash flow we are generating with the owners of the Company and that is what we intend to do, starting with the gold price-linked dividend. Subject, of course, to regularly quarterly Board approval, starting with the second quarter dividend shareholders will receive an annual dividend that increases by $0.20 for every $100 increase in our net realized gold price for the trailing quarter. To take the second quarter dividend as an example, we realized $1,382 an ounce, which corresponds to an $0.80 annual dividend on the chart that you see on this slide. So, we will be paying a $0.20 quarterly dividend on June 29. This represents a 33% increase over the first quarter dividend, and 100% increase over the year ago dividend.

Looking ahead, it is very likely that our net realized price for Q2 will be towards the high end of the $1,400 to $1,499 bucket, which should equate to an annual dividend, or $0.25 for the third quarter dividend payment. This would represent a further 25% increase. As we have said before, having the financial strength and flexibility we have allows us to both aggressively grow the business and return capital to shareholders. With a bullish view on our own internal opportunities and the gold price, we will continue to look at further alternatives to return additional cash to shareholders. With that, I will turn it over to Brian who will cover the operational performance for the quarter.

Thanks, Russell. We summarized our regional operating performance on slide 12, and year-over-year gold production was essentially unchanged at 1.3 million ounces with higher contributions from our Africa region. They were offset by lower production from South America, while North America and APAC production was essentially flat. Consolidated costs applicable to sales were 17% higher than last year, due to lower production in South America, as well as higher waste mining, milling and diesel costs in North America. And, as Russell mentioned a few moments ago, this is generally in line with our industry as a whole. Commencing our regional discussion on slide 13 with North America, you'll see a recent picture of the Gold Quarry area in Nevada, where remediation from the slide that took place in December 2009 is nearing completion. Over 40 million tons of alluvium and bedrock have been removed, and all of the equipment that was trapped by the slide, has been safely recovered. We are currently mining fresh ore feed for Mill 5 and approximately 50% of the ore going to Mill 5 is direct from Gold Quarry.

Turning to first quarter results, attributable gold production in North America was 482,000 ounces, up 2% over last year's first quarter. This increase was primarily due to higher leach placement at the Soledad-Dipolos pits at La Herradura in Mexico. Gold ounces produced in Nevada were virtually unchanged in the first quarter of 2011 from 2010, as higher mill production from underground sources was offset by lower leach placement due to mine sequencing. North American costs applicable to sales per ounce increased 7% in the first quarter of 2011, from 2010, due to higher waste mining, milling and diesel costs, and lower leach production in Nevada. This was partially offset by higher copper and silver byproduct credits. Newmont continues to expect full year North American gold production of 1.98 million to 2.1 million ounces at costs applicable to sales of $560 to $600 an ounce.

Moving to slide 14, attributable gold production during the first quarter in South America region at Yanacocha in Peru was 160,000 ounces. This includes 148,000 ounces from Yanacocha and 12,000 ounces from La Zanja. Gold production in South America decreased 26% in the first quarter of 2011 from 2010, due to lower leach placement, mill grade and transitional ore stockpiling at La Quinua. Costs applicable to sales per ounce were $583 per ounce, an increase of 57% in the first quarter of 2011 from 2010, due to lower production, higher labor costs, that was partially offset by lower workers participation costs and higher byproduct credits.

Newmont continues to expect 2011 attributable gold production in South America between 715,000 and 775,000 ounces at costs applicable to sales of between $500 and $550 per ounce. Turning to our Asia-Pacific region on slide 15, attributable gold production was 514,000 ounces, down 1.5% from the prior year quarter while copper production was 57 million pounds down 37% from Q1 2010. The biggest driver of the change in gold and copper production was Batu in Indonesia where we are currently processing from stockpiles while the Phase 6 stripping campaign is under way.

At our Boddington mine in Australia, we had a solid quarter despite eight days of down time due to a conveyor belt failure. Had we not experienced that unplanned event, production at Boddington would have been ahead of budget for the quarter. As the picture at right depicts, Boddington recently posted its 1 millionth ounce of gold production. Our Asia-Pacific region reported gold costs applicable to sales of $527 per ounce, up 15%, over last year's Q1, and copper costs applicable to sales of $1.11 per pound up 42%. Costs were impacted by the lower Batu Hijau production as well of attributable gold production -- sorry, increased over last -- Newmont continues to expect 2011 attributable gold production in the Asia-Pacific region of between 1.86 million and 1.99 million ounces, at costs applicable to sales of between $600 and $675 per ounce.

We also expect 2011 attributable copper production of 190 million to 220 million pounds at costs applicable to sales of $1.25 to $1.50 per pound. Regarding divestiture activity at Batu Hijau, Newmont's economic ownership currently remains at 48.5%. The Indonesian government has recently designated an agency of the Ministry of Finance as the entity that will buy the final 7% stake. On April 18, 2011, our subsidiary, then the agency, reached an agreement to finalize the terms for the purchase and sale, which is anticipated to occur by mid-2011.

On to slide 16. In Africa, Newmont's biggest growth region, our Ahafo mine delivered attributable gold production of 186,000 ounces in Q1 which was a 55% increase over last year's first quarter due to higher mill grade and recovery as a result of mine sequencing. The higher gold production at Africa also had a favorable impact on costs applicable to sales, which were $451 per ounce in Q1, a reduction of 17% that was partially offset by higher diesel and royalty costs. Newmont continues to expect 2011 attributable gold production at Ahafo of between 550,000 and 590,000 ounces at costs applicable to sales of $485 to $535 per ounce. I'll now turn the call back over to Richard.

Thanks, Brian. As mentioned at the beginning of the call, we would like to provide some additional detail on the growth plan that we announced at our recent Investor Day. First, I'll recap our growth strategy on slide 17. As shown, we plan to grow 35% to about 7 million ounces of attributable gold production by 2017 from a base of our current outlook of 5.1 million to 5.3 million ounces of gold for 2011. In order to get to that 7 million ounce run rate in 2017, we need to bring about 3.2 million ounces of incremental production online over the next few years, to offset the decline in the balance of our portfolio. Our growth will be phased in with about 20% of our new growth reflected in production by 2013, 50% by 2015, and the balance expected to be in production by 2017.

On slide 18, we've added some additional color to the timing of that incremental production by breaking down our growth profile by project. I've noted that several analysts have already got this fairly close and, so, we're providing some information that some of you may not need, but, in the interests of clarity, we're going to give it to everybody in this format. The sequence of new projects begins with the Subika and Nevada expansions, where development is advancing. And, it goes all the way through the commencement of production at Long Canyon which we expect, as shown on this slide, in 2017. If you'd like to reference this growth plan against our potential decline, we would direct you to the detailed regional waterfall that we provided in our Investor Day, where we give the regional decline for each of our operations.

As we've previously told you, 5.1 million to 5.3 million ounces is our current base and we expect the next couple of years to be essentially stable until we get back into higher grade ore in Phase 6, as Russ mentioned, beginning in 2013 - late and then moving into higher grade in 2014 and 2015. At that time, we'll also see the benefits of our new expansion projects, as shown on this slide. The numbers to the left of each bar represent the initial development capital of each of those projects. This view of our growth plan should allow investors to better understand that we have a fairly solid arc of production growth ahead of us.

Moving on to slide 19, we show our operating costs for these new projects and you'll note that we plotted them against the GFMS 2010 cost curve. Our forecasts are based on what we know today about our projects and they are unescalated. We're referencing our costs to the GFMS industry cost curve as a reminder that our actual costs will vary from our projections. But that we believe the relative position of our projects should remain consistent within their placement on the industry cost curve as it moves over time.

You'll see that our projects span the first to fourth quartiles reflecting the diversity of our operations. You'll also notice that the Company-wide CAS we're reporting today for the first quarter falls squarely near the 2010 industry midpoint for costs, which is inline with our prior guidance. As Russell mentioned, we continue to focus on execution to ensure that we protect our margins into the future. So, to summarize on slide 20, we believe that Newmont offers a unique combination of production growth, project returns, reserves and exploration upside, balance sheet strength, continued operational execution, and the industry's first and only gold price-linked dividend. With that, I'd like to thank you all for listening and open the call for questions.

(Operator Instructions) John Bridges, JPMorgan.

Many thanks for the information and especially slide 18, that makes life a whole lot easier. I wish I could run my model off that. Just wondered, the higher grades in Africa at Ahafo, can you give sort of a bit more color on that and how confident you are that you're only going to make your current guidance there?

Yes, John, it's Brian. Towards the end of last year, with some of the mine sequencing changes we made, we had stockpiled some fairly higher-grade ore coming out of Apensu, so in the first quarter we actually ran that higher-grade material through the plant and with the higher grades we also saw some higher recovery, as well. So we kind of see that as more of a one-off, which we had happen at Ahafo. So we're still, even though we did have quite a good quarter, we're still expecting to produce in that original guidance range by year-end.

Okay. How much flexibility do you have in the pit to go after higher-grade areas? Or just accelerate into Subika and sweeten up the feed that way?

We have some flexibility. We don't have a lot of flexibility actually in Subika. As you know, the portal to go underground is on the one side of the wall, where we're doing all the exploration work underground, so we do have some flexibility out of Apensu and out of Awonsu. But for the balance of this year we don't expect to see any significant changes over the last three quarters that would cause us to sort of look at a significant different production profile.

Okay. And then Australia was a bit ahead of expectations as well. What's going on down there?

In Australia, good results coming out of the Tanami and KCGM. Boddington essentially performing on par, so we have seen some of the other operations perform extremely well in Australia, as well. So really coming out of those two. The switch to owner-operated underground mining at Tanami is -- we're seeing some significant positive improvements in the operation there, so we're really coming out of Tanami and KCGM.

George Topping, Stifel.

On the Australian mine, I see CAS costs go from $560 an ounce in Q1 and then the guidance is, at midpoint about $735, can you give an indication of how that is going to increase through the quarters?

George, this is Russ. Sorry, can you repeat the number you said for the guidance because I don't think that is the same number I was looking at. Sorry.

The guidance $700 to $770 per ounce, other Australian/New Zealand.

George, some of that won't currency. Clearly, we have a decent AUD hedge book, but at $1.05 you're starting to see the impacts of the currency on that. We can get into some more detail, maybe we can take it offline, and get back to you. There are some inventory movements and we'll get some on that. Batu will have a tougher second half of the year, we've worked through some inventory in the first quarter at least. A number of factors moving around, largely driven by production.

Just to maybe comment on the numbers, the -- it is Randy, we've got $600 to $675, is the cost guidance for the entire region. Now the CapEx guidance on the next column over is $650 to $750. But you'll see coming out of Australia the highest cost figures that we've quoted, $700 to $770 for other Australian/New Zealand, that is going to come from some higher cost operations particularly at Tanami and Jundee.

Okay, good, that is what I was looking for. Also, I noticed on slide 18, the Elang isn't mentioned. Can you give us an update how the restart of the exploration program is going there?

Yes sure, this is Guy. We have just recently got the permit to start exploration at Elang so the focus is now to go and reestablish camp facilities, start working with the community and then continue with drilling operation. But at the moment that's what we want to focus on, and it's one of the projects that sits in our pipeline further out in the production profile.

Right, okay, but you got your -- you're clear to start exploration now?

Yes, that's correct. We plan on starting this year with drilling.

(Operator Instructions) John Bridges, JPMorgan.

Hi, this must be a really busy morning for conference calls.

Not in the Gulf space, John.

I thought -- just follow on, given the big building program you've got ahead of you, are you going to get -- be more aggressive in putting hedges on, in the currencies and oil? Just wondered what you're going to do there.

Yes, John we continue to look at that. We have a small oil book. Historically the issue has been around getting a hedge accounting so we don't have to take the mark-to-market volatility. I'll say that we're probably going to cross the Rubicon in the not too distant future of just taking the economics on the hedges and letting the accounting move. So we'll have to explain a little more noise on a quarterly basis. But as we look at the projects, yes, we are looking at managing our costs around those projects. You will continue to see more cost-related hedging, to not so much be able to pick bottoms, but to reduce volatility, because we think at the end of the day being able to reduce that volatility has value. So, so we will continue to look at opportunities both on the commodity, FX and interest rate side related to these projects.

Okay. Excellent. Yes, now that makes sense. Thanks, again.

Just for the avoidance of doubt, I've just underlined what Russ said, the cost side we do not hedge revenues, so just to be clear with anybody who didn't understand that.

John Tumazos, John Tumazos Independent Research.

Congratulations on the good results. While you have a splendid array of projects, there's an anomaly where some gold stocks haven't gone up even as the price of gold seems to make new records almost every week. Long Canyon is a very good example of a transaction close to your infrastructure, Miramar three years ago is maybe a good example of a transaction out of your infrastructure. But could we expect further strengthening of the project queue that is already strong, given that it is easier to find gold on Wall Street sometimes like Fritsch in the oil industry than to spend --

It's Richard --

-- on exploration, et cetera.

What I would say is two things, that, first, as you point out our own exploration program is increased this year. We do know that historically, and as we project in the future, we can discover at the most optimal costs per ounce a new project through our own exploration activities. So that's the first thing that we're focussed on. From time to time, though, as you point out, whether it is Miramar or Long Canyon, we will take advantage of opportunities where we see upside and perhaps the market doesn't fully appreciate that. But I would say that is not a steady diet for us, it is something that we'll take on from time to time. In addition, I would just remind people that we tended to look at these acquisitions in a cash format, not one where we utilize shares. So that by itself helps define how big or how much we'll do. And, lastly, I would just say with a run-up in junior stocks I don't think that it is always cheaper to buy things on Wall Street than it is to our own exploration efforts. So it is a combination approach for us. That is what we've shown historically. That's what we'll stick to.

David Christie, Scotia Capital.

Just quickly on Batu Hijau, can you give me an idea, you said you had troubles in the second half of the year there, or it's going to be lower, I guess. What is the grade profile from the stockpiles for the year? Do you have any idea what that is?

David, it is Russ. Just briefly, we had inventory at year-end that we're working through, both in the barn but also ahead of the crusher. So we're seeing that through. We disclosed our average grades on those stockpiles in our reserve tables and they're actually in the appendix to this release. It will move around a little on a quarterly basis depending on where we're accessing in those stockpiles. But you should look to that and the current year's production profile is a reasonable indication of an annual basis. Again with some quarterly volatility. And that gets accentuated a little bit by productivity in the wet season. For us, we're going into the dry season, so we have two months of nice dry roads and then the fourth quarter is a little more challenging. So, if you look it up for the current production profile we're roughly in there. We also do have a schedule down on the SAG mill motor replacement which will lower throughput for the balance of the year. So that is an extended down, it's a fairly significant rebuild, and we will see that obviously impact availability and production.

When is that down coming?

In May.

In May. Okay. And it will last what? 30 days or 60 days?

It is about a 45-day down, David.

Okay. And just on Yanacocha, the tonnage decline, is that where the tonnage throughput in this quarter, is that what we should expect for the rest of the year?

Yes, that's sort of inline. This was last year and then this year is a lower leach tonnage placement year, so that's sort of a fairly good projection for where we expect to be. We're still expecting to be within original guidance at Yanacocha by year end.

So, grades and recoveries and whatnot should be similar but tonnage will be the same as it was in this quarter, okay. I think that was it. Thank you very much.

Michael Dudas, Jefferies & Company.

I hope you have a great holiday upcoming. Russell, great presentation, especially on the cost movement in the industry. As you look out for Newmont the next couple of years, as you're transitioning towards the growth, of the 10 items that impact industry average costs, what are the two or three that we can look for to focus on for Newmont as that waterfall impacts your Company on a general basis?

Thanks, Mike. Sure, yes, it is a very interesting perspective and I always like to remind people we can't just look at the top line, we have got to look at the top and the cost line. And I think what we'll see if our thesis is correct, a weaker US dollar will drive gold production cost curves up because obviously the majority of gold production is outside the US. So I think FX is the one that is going to be industry-wide. Again if the thesis is correct on a weaker US dollar. You've seen that certainly on a trade-weighted basis over the last couple of months. The other issue is obviously fuel for us. Energy costs are about 25% of our cost structure. Again, we had budgeted at $90 oil and we're sitting today around $110. If you think about labor costs, that is about 45% of our cost structure and labor costs are largely for us, non-dollar denominated. I would say those. In conjunction with lower grades -- these deposits, the average grade is decreased and you have seen that in the gold industry and in the copper industry where grades have come off significantly. So I think you have got grade and you've got strip working against you and it is going to be a challenge for us, as Richard said earlier, maintaining our relative position on that cost curve, and at the end of the day, looking as John suggested, to try and manage some of the volatility around those cost structures. But clearly some challenges. I think what you won't see on the cost is in a $35 to $45 to $50 who knows where silver prices are going to be. A lot of the producers with significant silver byproduct will be shielded because clearly silver has had an incredible run over the 6 to 9 months that will offset some of those cost pressures, but those are the ones I lose sleep over, Mike.

Fair enough, just wish you had some rare earths to offset some of that. Thanks a lot.

Pawel Rajszel, Veritas Investment Research

Good morning, it's Pawel Rajszel here. I'm just working off of the production outlook midpoint roughly 5.2 million ounces, adding the 3.2 million that you have slated for growth and declining by the 1.6 million, getting to about 6.8 million, and I noticed in the Investor Day you had the 200,000 of production that was kind of classified under other. I am wondering if you could just give some clarity on where that 200,000 would come from, to get you to the 7 million?

Hi, it's Randy. I'll take that question. If you note in the same presentation there was a slide that preceded that waterfall chart and there were a few areas that we noted upside. In North America the upside, we think there is good upside potential coming out of Hope Bay. In South America we think there is good upside potential in our portfolio in Suriname. And in APAC -- in our Asia-Pacific region we have good upside coming out of KCGM and then upside out of Africa potential coming out of Akyem. Those are the main areas where we see some of that adding up to 200,000 or perhaps slightly more.

Okay. Great. And earlier you had mentioned you're looking for other opportunities to return capital to shareholders, just wondering what your views are on a share buyback especially if we get gold prices that are sustaining around the $1,500 mark that we have now?

Yes, it's Richard. I would just say at $1,500 there is a world of opportunity for us and share buyback is certainly a tool that we could use. I think the gold price-linked dividend is one that provides some certainty and flexibility in that upward pricing environment and there is an opportunity to share more with investors over time through that should we choose to do so. And then additionally I think with additional cash flow comes the ability to accelerate some of the production that we might have in some of our other projects that aren't even listed here. So I think that additional cash flow is really an opportunity for us to continue to underlie that growth with more certainty over time, provide more flexibility over time, and provide the opportunity for our shareholders to benefit through not just upward sloping production, but also upward sloping cash returns. So a share buyback is certainly one of the tools we could use, but one of many.

Great. And then just leading into that, I guess Hope Bay isn't in your timeline through 2017. What do you think it would take for that project to start to come into the profile?

Well, as you know, in our Hope Bay project at the moment we're driving a decline. We're actually advancing that project, we think in a very responsible way to ensure that we know how big the deposit can be before we commit significant infrastructure. But we're spending significant dollars on exploration we believe in the district, we think there is significant upside there. I think our conservative stance here would say, we're not ready to advance this into our production timeline, that we have on slide 18, and as Randy pointed out, it is one of many opportunities to bring into production. We'll keep The Street updated on that. At the moment, as I said, we are driving decline and I think things continue to look good for us and we'll continue to keep you updated.

David Christie, Scotia Capital.

Yes, one more question for you guys. On silver, you mentioned byproduct credits from silver, but I don't think you guys disclosed your silver grades anywhere. I was wondering if you can give me what your silver grades were at your -- probably your two most highest concentration of silver will be Yanacocha and La Herradura. Is that right?

David, it's Russ. We'll have to get back to you. We don't track our silver grades and we don't report them in our reserves. But to your question we do produce a (inaudible) silver out of Midas if you look at it in the North American --

Midas as well, okay.

Midas is a big producer. Then, Yanacocha, although their recovery is low, we do produce significant silver out of there. But I'll ask John Seaberg to get back with you. (Inaudible) at $5 no one pays too much attention to the silver production but around $40 to $50, it is a nice little kicker that we get.

Yes, I was just noticing the byproduct credits were increasing nicely. Thank you.

I'll get back to you on that.

Adam Golaski, Goldman Sachs.

You mentioned earlier that you look at acquisitions in a cash format not in a format where you utilize shares and you mentioned that, that approach limits your acquisition bite-size. But you've still got greater than $5 billion of cash and marketables and liquidity on your balance sheet. So I'm wondering is that the kind of bite-size that we should be thinking about if we are thinking about how you might look at M&A opportunities?

Just to be clear, what I said is when we're -- and I may not have said it as clearly as I should have, when we look at acquisitions that don't bring current production, we will generally tend to use cash, and I think you could think of bite-size as being kind of what we've done traditionally. Miramar was about $1.5 billion, Fronteer was about $2.3 billion. I think those are the sizes that are probably big enough for us unless we see something clearly unusual. But, again, just to emphasize, what we have on slide 18 is really a way for us to underpin our growth without having to do additional acquisitions, and I think it is just additional upside for us. So we don't have to buy anything. If we do, we expect we'll buy it for value.

Great. Thank you and second question just has to do with the gold price-linked dividend. Can you talk about, and I apologize for not knowing this, because I'm sure you've probably mentioned it already somewhere else, but if and when the gold price should ever fall, and let's hope that is a long time away, how does the gold price dividend behave? Is it any way stickier on the way down than on the way up?

Adam, if you look at the slide -- on slide 11 there, what we have shown it is downturn at $1,100 gold price we would be at a $0.40 annual dividend. Obviously the dividend and the level of that dividend is a function of the Board's approval and we discuss it quarterly with them. But as you said we have a very strong balance sheet, still generating significant cash flow and even at an $1,100 gold price as we stress test to the down side, we still have that availability to maintain that dividend. So anything beneath $1,100 I just submit we would obviously take that to the Board in light of ongoing other operating costs and financial capability that we have on the balance sheet.

And I just underlie it that this is a Company which has paid the dividend for a long period of time indicating both the financial strength and desire to ensure that shareholders have a reason to stay in the stock for yield really, so we'll continue to look at that, as Russ said, every quarter, and that really is the way that our Board will approach this policy.

Elizabeth Collins, Morningstar.

Can you give us reminder of what Batu might look like once the ore is reached in Phase 6. We have an idea of Phase 7 costs in production, but maybe you can give us a little bit more color on Phase 6 once the ore is reached in late 2013?

Yes, hi, it is Russ. Phase 6 will look very similar to Phase 5. We were right in the bottom of Phase 5. So I use 2010 as reasonable proxy. What we see at the bottom of these phases of ore is a disproportionately higher gold production versus copper. So both the copper and gold grade increase but the gold grade increases proportionately more. So I'd look to Phase 5 as a reasonable approximation for what we'll see in Phase 6 in 2014 and 2015.

Thank you very much for your attention today. And we hope you all have a great weekend and a good Easter.

Thank you. That does conclude the conference. You may disconnect your phone lines at this time.