紐蒙特黃金公司 (NEM) 2012 Q4 法說會逐字稿

Welcome to Newmont Mining fourth-quarter and full-year 2012 earnings conference call. All lines will be on a listen-only mode until we open it up for questions and answers. Today's conference is being recorded. If you have any objections, please disconnect at this time.

I would now like to turn the call over to John Seaberg, Vice President of Investor Relations for Newmont Mining Corporation. Sir, you may begin.

Thank you, operator. Good morning, everyone. Welcome to Newmont's fourth-quarter and full-year 2012 earnings conference call. Joining us on the call today are -- Gary Goldberg, President and Chief Operating Officer, and other members of our executive leadership team who will be available for questions at the end of our call, including Russell Ball, Chief Financial Officer; Randy Engel, Executive Vice President of Strategic Development; and Grigore Simon, Senior Vice President of Exploration.

Turning to Slide 2, I'd like to refer you to our cautionary statement, as we will be discussing forward-looking information, which is subject to a number of risks, as further described on our SEC filings, which can be found on our website at Newmont.com.

Now I would like to turn the call over to Gary.

Thanks, John. Good morning, everyone. Before we get into the quarterly results, I would like to make some introductory comments, and spend a few minutes speaking about safety.

I would like to take a moment to recognize and thank my predecessor, Richard O'Brien, as well as our CFO, Russell Ball. First of all, I would like to personally thank Richard for the solid foundation that he has built here at Newmont. I'm honored to take the Company into the next phase of development. Richard can take great pride in what Newmont has accomplished under his leadership. He has built a solid operational foundation, a talented team, and a strong balance sheet. He instilled a more rigorous financial discipline that resulted in industry-leading per-share performance in gold reserves, gold production, and operating cash flow. He also led the introduction of an innovative gold price-linked dividend that gives our shareholders direct leverage to gold price.

Similarly, as most of you would have seen last night in our earnings release, Russell Ball has also decided to step down, and will leave Newmont later this year. He plans to continue in his current capacity to ensure a smooth transition as the Company seeks its new CFO. I would like to thank Russell for his tireless contributions to Newmont over the better part of the last two decades. Like Richard, Russell can take great pride in Newmont's accomplishments with his leadership as CFO. Russell helped the Company build a solid financial foundation, with a strong balance sheet and the financial flexibility needed to position Newmont as an industry leader. Thanks to Richard's and Russell's hard work, contributions, and leadership, Newmont is well positioned for the next stage of its growth and development.

Safety is our most important value. And I'll start on Slide 3, with a look at our performance. In 2012, we reduced our total injury rate by 6%, and the number of serious injuries by 36% compared to 2011. In the last quarter of the year, we achieved a new Company record, as we drove our total accident frequency rate below 0.5 injuries per 200,000 hours worked. In 2013, we'll work to lower our total injury rate by an additional 10%, as we move our focus towards our goal of zero harm. Safe operations are productive operations. Conversely, less safe operations create distracted management teams, performance volatility, and compound safety risks. Safety has and will continue to be a passion for me. And I believe it will deliver economic and social benefits for all Newmont stakeholders.

Turning to Slide 4, we are committed to maximizing value for our shareholders by focusing on mining fundamentals, from technical competency to safety and social responsibility. This will lay the groundwork for profitable growth and stronger cash flow generation. Over the next few years, we expect capital spending to decrease with the completion of projects such as Akyem in Ghana, Phoenix Copper Leach in Nevada, and reduced spending on Conga.

These new contributions to our production profile, combined with increased production from Batu Hijau should positively impact Newmont's free cash flow in 2014 and 2015. Newmont generates over $300 million in after-tax operating cash flow for every $100 increase in the realized gold price. With our focus on total cost management, we think we can further improve our leverage to gold.

We will continue to return capital back to our shareholders with our gold price-linked dividend. Since its introduction in April 2011, we have returned over $1 billion to our shareholders, with another $210 million in distributions planned for the first quarter. We returned more cash per share and offer more leverage in our dividend policy than any company in the gold industry. We also plan to maximize value of our assets by maintaining a strong balance sheet, sustaining a dedicated work force, and reducing our total costs.

Turning to Slide 5, we show Newmont's all-in sustaining costs under the evolving World Gold Council's definition for 2012 and 2013. This emphasizes our commitment to managing the total cost of production, and providing greater transparency to our stakeholders. Our 2012 all-in sustaining costs of $1,149 per ounce was favorably impacted by $130 million in cost reductions last year. Looking forward, we expect all-in sustaining costs to remain flat from 2012 to 2013. This will be accomplished by reducing our combined general and administrative costs, exploration, advanced projects, and sustaining capital expenditures by approximately 15% to 20% compared with 2012. These cuts will offset a roughly 5% increase in expected 2013 CAS from inflation and the impact of lower grades. This is a step in the right direction, but still is not good enough. One of my key areas of focus will be to reduce these costs even further across all of our operations.

On to Slide 6. Earlier this week, we announced a quarterly dividend of $0.425 per share based on last quarter's average PM Gold Fix of $1,718 per ounce. This equates to a yield of about 4% at our current share price. We are committed to maintaining our gold-linked dividend policy, which provides gold leverage without the cost of holding physical gold or ETFs.

Turning to Slide 7, we have a geographically diverse asset portfolio, a nearly 100 million ounce reserve base, and a land position covering over 75,000 square kilometers. I will highlight each of the regions individually, but the point I want to make is that this scale will support our success for years to come.

On Slide 8, we have summarized our fourth-quarter and full-year operational performance. Attributable gold production quarter over quarter was stable, while our year-over-year production was down 4%. For the year, the decrease is a result of continued Phase 6 stripping at Batu Hijau, lower throughput grade and recovery at Tanami, and mine sequencing at Waihi. Copper production for the same two periods was down largely due to the Phase 6 stripping campaign at Batu Hijau.

Our gold CAS per ounce was $720 for the quarter. Full-year CAS of $677 was within our previously announced range of $670 to $680. The increase of 15% for the year is due to lower production, higher mining and milling costs, and lower by-product credits. Copper CAS per pound increased 86% for the year due to planned lower production, as we work through Phase 6 stripping at Batu Hijau, and higher mill maintenance costs at Boddington. We expect copper CAS to improve significantly once we're back in the bottom of the pit at Batu Hijau. Finally, all-in sustaining costs increased for both the quarter and year, as higher CAS and lower copper by-product credits were spread over lower gold production.

Our financial results are summarized on Slide 9. We continued to generate significant net income and cash flow from operations. Our adjusted net income was approximately $550 million for the quarter, and $1.9 billion for the year. We generated cash flow from operations of approximately $850 million for the quarter, and $2.4 billion for the year. We also continued to return capital to our shareholders, with total dividends paid of $1.40 per share. Reported net income was favorably impacted by a gain from discontinued operations, a gain on the sale of assets, including the McPhillamys property in Australia, as well as some favorable tax benefits due to internal restructuring.

Now turning to Slide 10. During the fourth quarter, North America's production was lower, while performing in line with plans. While Africa's was growing, APAC's production was slightly higher, offset by expected lower production in South America. CAS increased to $720 per ounce due to lower production from North and South America, higher royalties in North America and Africa, and higher waste mining costs in APAC.

Turning to Slide 11, our North America region continues to be the big driver of our business, contributing 42% of Newmont's production in the fourth quarter. Full-year gold production from North America increased slightly over 2011 to just under 2 million ounces, as we saw higher throughput at Mill 6 and Twin Creeks in Nevada, along with contributions from the new Emigrant leach pad, which began production in the third quarter. At La Herradura in Mexico, production was in line with a year ago. North America CAS increased 7% over last year due to higher diesel, contractor costs, and royalties in Nevada, as well as higher waste tons mined and higher commodity prices at La Herradura.

Looking forward, due in part to extremely cold winter weather in Nevada we experienced in December and into January, we're about 30,000 ounces behind plan as of the end of January. We intend to make this production up as the year progresses. And we are maintaining our 2013 production outlook for Nevada of between 1.7 and 1.8 million ounces.

Turning to Slide 12, we continued to develop the district potential surrounding the Long Canyon deposit in Nevada. Yesterday, we reported an initial inferred resource of 2.6 million ounces. We continue to see the long-term district opportunity for 3 to 4 times that initial resource. We have an additional 65,000 meters of drilling planned for 2013. We plan to submit our draft environmental impact study to the BLM at the end of this year. We are continuing with our selection and confirmation study.

Moving to Slide 13. Yanacocha's fourth-quarter performance was in line with expectations. Full-year production was higher than 2011, which favorably impacted CAS. Our 2013 guidance for Yanacocha reflects a 25% decrease in production from 2012. We expect to maintain these production levels for the next few years. Those volume impacts are also reflected in Yanacocha's 2013 CAS outlook. You'll see that capital is reduced by more than 50% due primarily to lower spending at Conga.

At Merian, we completed a feasibility study at the end of 2012, and declared reserves of 2.9 million ounces. With those results, we have now met the requirements to achieve an ownership interest of 80% of the project. Our investment agreement is now in front of the Suriname's National Assembly pending its approval, which is expected in the first half of this year.

On Slide 14, we are still on track with the Water First approach at Conga. We expect to complete the Chailhuagon reservoir later this year. And we are refreshing our approach to stakeholder engagement in the region. Conga will only move forward if we have local, community, and government support, as well as acceptable returns.

Moving to Slide 15, our Asia-Pacific region's fourth-quarter performance was positively impacted by a strong finish at Boddington. Other Australia/New Zealand production was down due to the lower throughput and grade at Tanami, as well as lower throughput at Waihi, both of which we had discussed previously. At Boddington and other Australia/New Zealand, CAS increased due to higher strip ratios, higher mill maintenance costs, and the impact of the carbon tax being implemented in Australia. Capital expenditure is down in Australia/New Zealand due to the reassessment of the Tanami shaft project we announced last year.

Batu Hijau's fourth-quarter production was impacted by geo-technical issues that we expect to have addressed this month. These issues impacted our waste stripping capacity. Full-year performance was a function of processing lower-grade stockpile material, lower throughputs and recoveries. For 2013, we are separating reporting for APAC into Australia/New Zealand and Indonesia to align to our management structure.

Our outlook for Batu in 2013 is similar to 2012. We are working through the Phase 6 stripping campaign, and plan to reach higher-grade ore later in 2014. Upon completion of this stripping phase, we expect gold production could increase by as much as 10 times by 2015 over our 2013 outlook.

Just a quick update regarding the divestiture process at Batu Hijau. Our current economic interest is still 48.5%. Discussions continue with the Indonesian government in regard to divesting the final 7% stake. The fifth extension of the closing deadline of the purchase and sale of this stake was signed in January, extending the deadline to 26 April. Our effective economic interest will be 44.56% once the divestment is complete. We will keep you informed as we look to the Indonesian central government to designate the ultimate purchaser of the divestiture share.

Late last year, we also negotiated a new labor agreement in Indonesia. In exchange for benefit improvements and wage increases of 3% and 4% in 2013 and 2014, respectively, we negotiated work practice changes that will positively impact safety and productivity. We employed a good process around the negotiations, with great cooperation from all involved, and specific goals we hoped to achieve. I would like to offer my compliments to the management and worker representatives involved in the negotiations.

On Slide 16, Ahafo contributed 561,000 ounces of production in 2012, in line with 2011. CAS was up from a year ago, primarily as a result of higher labor, commodity, and royalty costs. Capital costs are up in 2013 as we complete the construction of Akyem.

On Slide 17, Africa's production is expected to grow over the next few years, primarily through the development of Akyem, where we expect production to begin in late 2013. I had the opportunity to visit Akyem last week. And I'm happy to report that we remain on schedule and on budget to meet the target. In addition to reviewing construction and mining progress, I had the chance to visit with some of our Akyem apprentices. You can see here in the picture in the lower right. These young men and women are from the 10 local communities that surround the project, and are in various stages of their four-year training program. Once their training is complete, they will fill various skilled positions at Akyem.

Moving on to Slide 18, we are pleased to report that we have covered depletion, and increased our gold reserve base to 99.2 million ounces. Our reserves were calculated at $1,400 gold, up from $1,200 gold last year, which added about 1.5 million ounces due to the higher gold price. Additions come primarily from North and South America, in particular at Merian and Leeville-Turf. Revisions came from Boddington, Tanami, Ahafo, and Twin Creeks. As part of our total cost management effort, we reduced 2012 exploration spending by 12%. In 2013, we'll trim exploration costs by a further 25% compared to 2012, as we focus on our best opportunities.

On Slide 19, you'll see that copper reserves were calculated at $3.25 per pound in 2012, compared to $3 per pound in 2011. Copper reserves decreased to 9.5 billion pounds as we depleted reserves from production without significant additions.

Turning to the final slide, Newmont turned in a good performance in 2012, but we can and we will do better. I've been in mining for 30 years, and at Newmont for just over one. What I would like to do is share a few observations about the sector, and my vision for the Company, as I take up the reins as CEO. Like all gold miners, we face significant headwinds. First, input and labor costs are rising, and the cost of getting an ounce of gold out of the ground has doubled in the past five years. Second, the industry has a tradition of chasing reserves growth rather than cash flow. Third, new deposits are expensive to develop, and in increasingly difficult jurisdictions. As an industry, our total return performance has been poor, especially against the backdrop of more than a decade of year-on-year gold price increases.

Our investors and our Board understandably expect to see better returns, and so do our management and our employees. I see these trends as a call to arms for me and for Newmont. We have a tradition of creating wealth for shareholders, delivering value from our assets, and working safely and responsibly in tough operating environments. None of that will change on my watch.

However, we are not content to stay in the middle of the pack. And business as usual is not an option. Our cash flow potential is strong. Our cost-cutting program is gaining momentum. We are making real progress in tightening our capital discipline. We also have a solid asset portfolio, reserve base, and team. This is why I'm excited about Newmont, and you should be, too.

But I'm also excited about making some changes that will help us break out of that pack. Our attention to safety is good, but we need to get better. We are shifting the managerial focus of the Business to maximizing our profitability. And I intend to inject a much greater sense of urgency into how we do that. We need to change the trajectory on our costs and productivity.

We've been increasing the rigor of our capital allocation processes. I'm saying no to capital requests quite regularly, and will continue to do so until our business cases warrant funding. We need to build flexibility into our plans so that we can manage through the inevitable gold price changes without needing to make knee-jerk adjustments. In this context, our shift to a total cost focus is a better reflection of our true performance.

I continue to be impressed by the commitment and hard work of our employees and contractors. And I know they will support me in achieving these goals. On this note, I would like to recognize the accounting, finance, tax, and internal audit teams who have put out an extraordinary effort this time of year. I know that our investors appreciate timely, quality audited financial statements, as do I.

To sum it up, I want to build a Newmont that regularly delivers on expectations, and is focused on execution. I know you will need to see some results before you're ready to credit Newmont for delivering on its full potential, but I invite you to watch this space. Thank you very much.

I would like to open it up for questions now.

(Operator Instructions)

John Bridges, JPMC

You've laid out succinctly all the challenges the industry is facing. I just wondered how you felt that your policies would differ from those of Richard and Russell, who we congratulate and wish the best of luck in their new endeavors. Could you comment on that?

Sure thing, John. I appreciate the question. I think first of all, I'm building off of the great foundation that they have helped to build here over their years of service at Newmont. I clearly come with an operating background and years of experience in a variety of businesses, but had my start here in the copper business in Utah in some difficult times. I started when Bingham Canyon had 7,000 employees and five years later, we had 90 employees. So I've seen the swings and roundabouts. With that comes with an experienced base that really wants and helps me focus people on looking at the long-term, in terms of delivering value, which is not different than Richard, but it really brings a push for me on that. Also, making sure you're prepared for the inevitable swings we're going to get along the way. You've seen a focus and continue to see the focus on safety and safety results. I think the approach to capital rigor and how we go through and assess projects and make sure that we've got good, sound technical basis, the reserves, the right plans in place to be able to effect value, are some of the areas that you'll begin to see. So carrying -- it's in some ways heightened, but it also brings my experience base to the fore.

Well, I hope by giving that detail of the employment fall at Utah, you haven't given any of your people heart attacks. (laughter) But I wondered if you -- just as a follow-up, a geology question. Long Canyon has been -- the number -- the ounces have been slow to come. I wonder if you could sort of detail a little bit as to why that's happening? Why it's taking so long. Thank you.

Thanks, John. Just so I don't give anyone a heart attack, that was a significant decrease in price. We closed Utah Copper. As you look today, it's running pretty well. Moving on to the Long Canyon question. Actually, the reserve, actually the resource that we reported is in line with what we would have expected at this phase in development. We've got a lot of drilling, which we said we needed to do when we acquired the asset. We continue to do the drilling. So it's not out of line with what our expectations are for being able to announce resource at this stage. We continue to work through the different phases of the process. But it also -- I would expect it's going take a number of years to get to where we do expect to achieve the final numbers that we painted as the potential future. Right now, our focus is on making sure we have what's an appropriate amount of reserves to be able to declare when we begin production. So that's really where our focus is now. But I also want to make sure people are aware of the full-time -- or the full potential of the deposit. So it's not just putting drilling in to fill up the resource bank. It's putting it in where we need to put it in. It will come with time.

Excellent. Congratulations on the results and in replacing your reserves. Thank you.

Jorge Beristain, Deutsche Bank.

My question is just following up a little bit on the exploration front. In terms of the return that you're seeing on the exploration dollars that Newmont's been spending quite heavily in the past few years. I think if we strip out the gold price effect, you'll agree that there wasn't that much change in actual proven and probable for Newmont year-on-year. I was just wondering about your thinking, in terms of, if you'd still rather be heavily funding that kind of expenditure? Or if you would rather put the money into other things? If you could also comment about the Tanami shaft project being suspended. If that's along the lines of the capital rigor you're talking about.

Okay. First, on reserves. Thanks for the question, Jorge. Clearly, and that's why we're transparent about what the gold price increase is. So, yes, without that increase, it would have been about even from year to year. But a lot of good, hard work's been done by the exploration team to get to the additions that you see there. I see that as a very effective -- cost effective way for us to add to our reserve and resource bank going forward. So Grigore and his team and a number of us spent a lot of time last year taking a look at our priorities and making sure that we were focused on where we think are the best areas to put the money and the most effective ways to spend our exploration dollars. I've looked at it as a bit -- as belt tightening, making sure we're effectively spending the monies that we do have targeted. I do see this as a continued important part for our future. In regards to the Tanami shaft. Last year, we announced that we were really putting that whole project on hold, pending the ability to make sure we delivered good operating results. So we made that decision last year. I do see that as part of the capital rigor. It's important that we get the good returns on our existing assets before we make the investment in further expansions.

Thank you. Maybe if you could also comment a little bit about your move to this cost, all-in cost as is generally in the industry now. Could you talk maybe about the other side of the equation as well? I think that perhaps we're focusing too much on the numerator and not the denominator, which I am also trying to understand from companies, the all-in invested capital. Do you see any push from the industry to start to be more forthcoming about what ultimately goes into projects, both in terms of land value and CapEx?

Yes. I think first of all, my view of it -- and that comes back to the rigor we put into the investment analysis. We take a look. Clearly, we're MPV-driven. We have a view on gold price that goes in. We have ways that we go through those different analysis and look at the ups and downs. I think we're pretty transparent, Jorge, in what we provide to the market, on what we expect the development capital of costs for those projects to be. I think the other piece and one of the things that I'm looking to drive, not only all-in sustaining costs, but what's the return on capital employed in getting those numbers out in front and across the business, is a critical metric that I'm used to using and we are using here at Newmont.

Great. Well, I look forward to more of that disclosure about the return on capital employed on a go-forward basis. Thank you.

Patrick Chidley, HSBC.

Gary, I just wanted to ask you about where you see cost pressures this year going forward. Are they labor? Are they energy? Are they reagents, for example? A follow-up question to that is, where do you see productivity improvements in Newmont, given your first year's experience there and given your past experience in the mining industry? Did you see Newmont as -- do you see any low-hanging fruit there in terms of productivity, or is really just maybe [tough]?

Okay. Thanks for both questions, Patrick. In regards to where we're seeing the cost pressures, I think clearly, labor costs, which tie back to your question on productivity, are related. The changes you saw in our contract at Batu Hijau reflect a real effort by the team there to make sure that we share with our employees what the business case is and what the issues are that we face at each of the operations in regards to costs. So making sure people are aware of the issues that the industry faces within our business is an important part, I think, of managing that cost effectively so that we do control it. So that's one piece you see. I think that's our job to manage that piece. The second piece in regards to the increase in costs, probably cyanide cost is one that we see a bit of an uptick more this year. It's one we're working with our global supply chain team to look at how we manage and how we approach it differently. But I think, with my background, and I was involved in some global supply chain deals with my past employer. I think there's some opportunities there to look at how we do contracting.

I think we've done a good job historically, but I think it's time to revisit those things again across the business. In regards to productivity, we've launched a process. It's begun at Boddington, that we're calling our full potential process to review costs really from the mine plan right through gold production, including G&A costs, all the operating costs and productivity. That began last month. I'll actually be visiting Boddington here in another week to see how that process is proceeding. But the plan is to begin there using our internal experts, as well as a little outside assistance. But looking at what we can do to really extract the full potential from the business. So I wouldn't say that there's easy, low-hanging fruit by any means. You've got to work at this in this business, but we've got to get on with it. We've got the process going and the plan is to roll that across all of our regions through the course of this year.

Yes, thanks. Just a follow-up, I know you once had -- for many years, you had quite a sort of significant technology -- investment in technology centered there in Denver. I'm wondering if anything's come out of that tons of new technology that might bring down costs in the future at certain of the mines.

Yes. Patrick, that's one area we're always looking at. I think we invest both in new innovation, as well as making sure we're applying existing technologies effectively. We've made some changes in Management there just recently. We have Scott Lawson, who has joined as their Senior Vice President of Technical Services. With that, we're combining with the technical group here in Denver, the business excellence group, so that we really combine those resources. In fact, the project I mentioned, the full potential is being resourced out of Scott's team. So we do look at that. I think there's some things we can apply. I know we've had a team over to take a look at the operations center in Perth that Rio Tinto runs, to take a look at how we might apply that at our Nevada operations. So we are taking a look at those sorts of things. But probably more so not leading edge technology changes, but fast follower.

Right, okay. Just one final question, just -- can you just confirm or reconfirm that the focus of Newmont is still on gold. You wouldn't be thinking about any diversification?

I think you look at where 90% of our revenues come from, our focus is clearly on gold. I know I've got a background in coal, but I'm not going that direction.

Mike Jalonen, Bank of America.

Hi, Gary, welcome aboard there. I guess officially March 1, in your new role. But just a question on Merian. I notice you have a reserve feasibility study. I guess could you share with us any capital costs, production costs for Merian for that feasibility study?

Yes. At this stage, we're still going through the process of reviewing the results of that feasibility study internally. We actually have our investment review process, which it will come forward here in the another -- for detailed review here in the another month. I did have the benefit of visiting there a couple of weeks ago and looking at this potential operating site. Along with it, I visited the Rosebel operations of Iamgold just to get a flavor of what it's like to operate in Suriname. I've got to say, I'm really impressed with the work that our team's done on the ground in understanding this resource and what we might be able to do with it. We're working with the government. As you may or may not know, the government would be a partner in this project going forward. Or at least has the opportunity to become a partner. Getting the investment agreement details reviewed and approved by their parliament, is the next phase in that process.

What kind of infrastructure? Just one quick question, what kind of infrastructure would you need for Merian once you make a go-ahead decision? Power lines, whatever?

Yes. The power -- our power situation is a little different than Iamgold's, because they get power off the grid. We would be independent of the grid because we're located away from the grid, so it just doesn't make sense to build a power line there. So we would be powering through our own self generation at the site.

Okay. Well, thank you. Good luck.

Greg Barnes, TD Securities.

I just want to get a better feel for how Yanacocha is going to evolve over the next several years. I know you said production would be maintained at 2013 levels for a couple years, but what happens after that?

Good question, Greg. I think a couple of things. As we look at Yanacocha -- and Yanacocha has really been founded on all the oxide deposits there. We've been both milling and leaching, as you know, for almost two decades. As we look to the future, the amount of oxide deposits are decreasing. But we've got a fantastic sulfide resource. So we're looking at where we can take that and extend that. It's not just gold. We also have copper there, too. So we're going through a variety of things. One of the projects we're doing right now is a test of bio-leaching for copper recovery from the sulfide copper deposit. So a lot of technical work going in, too, because of the quality of some of the reserves -- basically, the arsenic that would be in some of the concentrates if we were to produce a copper or gold concentrate, to make sure that we can properly process it and cost effectively, obviously, do that as well.

At the same time, we've got Conga. We're -- I mentioned, we're continuing with the water first project there. But looking at the ability to get through the social acceptance and a lot of work's going on, on the ground there. We've made some changes with Management. We moved our headquarters up to Cajamarca, which I think it's an important place for us to be located. Because it's an important part for the overall business going forward there in Peru. So I think that's critical for us as we look at getting the social acceptance we need to be on the ground. Then clearly, we've got to have the financial numbers. So, how that all fits together is part of the work we're doing here this year and as we reprioritize where Conga fits into that mix.

Yanacocha proper then, does production step-down in stages over the next five or six years?

Yes. We've really taken a step this year to realign basis based on what our reserve base looks on the oxide deposits. Then look at how we will supplement that through some satellite oxide deposits and then fill in with the sulfides I mentioned after that.

Stephen Walker, RBC Capital Markets.

Gary, two questions. The first is a follow-up to Mike's question on Merian. Where are you in the process in negotiating with the government? Are there any milestones here in the near-term that we can expect from those negotiations? Then as a part of that, if you were to get negotiations with the government finalized and an operating agreement in hand, how long would it take for the Board, or at what stage is it at with respect to Board approval and construction start?

Okay. In regards to the government negotiations, we've actually been through a very productive set of negotiations with the government. We've reached an agreement. That's what -- that agreement is what's in front of the parliament for approval. The government is going through a process of vetting that with various parties. It's not a process that has a specific time line to it. That's why I say, we hope to see it by midyear. But I know that the government and the different parties are actively reviewing that. I think the milestone really is the parliament approval. In regards to Board approval, obviously, having the government approval is a critical piece. Permits is a critical piece. But most importantly, having the financial returns that justify the investment is the critical piece that we would be putting in front of the Board. So that could come as early as the first half of this year or it could go into the second half of this year. Then once we get that approval, assuming we get that approval, we would move right on in -- the team has set up and has looked at different ways to execute and begin construction of that project, which is not an extremely long time. I think from the time we get all the necessary approvals, we're looking at about a two-year window to get that developed and get first production.

Great. Thank you for that. Then just a second question, on Batu Hijau, there's going to be a fairly material impact as you finish the waste stripping phase here and go into the higher grade copper/cold, gold/copper core again. Can you give us a sense over the next 24, 36 months sort of the ramp-up and the tail-off of how that material gets blended into the mine sequence?

Yes, it's -- probably more complex to do over the phone than with a little picture. But I think we do start to run into pods of the higher grade ore and some of the sub-grade ore along the way. We'll be processing that through, a little bit here in 2013. We run into more of that in 2014, until the end of 2014 when we get into really the full ore body. So you'll see bits of it start to show up more in 2014. It will really grow through 2014 and then 2015 we'll be into the full new ore, fresh ore.

Tanya Jakusconek, Scotiabank.

Richard, Russell, just wanting to wish you the best for your future endeavors. Welcome, Gary. Just, I want to come back to Yanacocha. I'm just looking at the reserves that you currently have in place. Assuming that we keep at this sort of stable production level, it looks like we only really have four years left of the mine life, including, let's say, a little -- maybe a bit longer with the stockpiles. I'm just wondering, are there any results from the pilot plant testing that was being done on the Yanacocha sulfides? What's the status of Cerro Quilish? I think we used to have a resource of over 2 million ounces there. Just wondered where that was. Yes, maybe just that.

Okay. Well, in regards to the pilot plant testing, we're in the final stages of completing the pilot plant. Then it takes a good 1 year to 18 months to run effective tests to make sure we get the recoveries. We've had great lab results and pilot scale, what we call column leach tests, to confirm recoveries. Actually, it looks quite attractive from that standpoint. But we need to go through this process of confirming, through building -- these aren't small leach pads. These are million ton leach pads that we're building to be able to test that we're able to get the recoveries. I would see that still out about 18 months. We'll get indications earlier, but that's still out about that long.

Maybe just coming back on Cerro Quilish. Where are we on that deposit?

Yes. Sorry. In regards to Quilish. Quilish is still a resource that's there, but it's not one that we have in our current development plans. We -- as you may know, we had issues in looking to develop it at one point in time. Actually, have made a commitment to the local communities not to pursue that at this time. So we are still keeping with that commitment.

Okay. So that's not one of these ones that you're looking in terms of supplementing, then, for when Yanacocha offsides fade off?

That's correct.

Would it be fair to say then, Gary, that we're looking at a four-year mine life and a little bit longer on the stockpiles at Yanacocha, if we kept this current rate?

If we were to not have any success with the sulfides, which I'm still confident the team is working on and has good potential to extend, that's correct.

Garrett Nelson, BB&T Capital Markets.

You've obviously made a significant cut to the CapEx budget versus what the Company spent last year. But development CapEx still represents about 40% of the total. Will you continue to take a look at the returns on those growth projects? Or should we consider the CapEx guidance a definitive total of what's been approved and what you plan to spend this year?

Yes. Thanks, Garrett. I think in terms of the projects that we have going out there, clearly, a team is coming on board later this year. That one's going to move through to completion. The Phoenix Copper Leach project also looking to -- for later this year to come on. You've seen the decision made with Tanami. I think that's the right thing. But I've done the scan across all of our operations. We'll continue to do and put the rigor behind assessing our capital investments and development capital investments to make sure we get the return on capital that we need to do the projects.

Dave Hove, Stifel.

My question is, first, on the $700 million for the exploration and advanced project. What are the -- which projects are the major consumers of this expense? How should we think about it going forward? I know for 2013, the guidance is $600 million to $700 million.

I'm sorry. Just a minute.

So your question is the combined exploration and advanced projects, $600 million to $700 million in total, correct?

Yes.

Yes. So we expect that in the next few years, we have opportunity, particularly in the advanced projects area, to tighten up our spending there as well. That's part of our overall effort to reduce total costs. I think as you see, the capital discipline that Gary has been referencing throughout the call, advanced projects is probably one of the areas that we have some additional opportunities.

So right now, which are the major projects which consume that?

Yes. So the major projects that consume most of our advanced projects -- you're going to see some of the projects in Africa, the likes of Subika. You're going to see some of the projects in Nevada, the likes of Long Canyon. Those are going to be the two main areas where you'll see advanced project spending.

A little bit in Elang as well, in Indonesia would be the other one I would put in there. Sorry, Dave. I hadn't picked up where you were pointing with the number.

All right. No. That's no problem. Okay. Then the second question on Long Canyon. How much was spent for exploration there in 2012? What is the budget there for 2013?

Okay. I've got Grigore here to give an update on that.

Hi, Dave. Yes, this is Grigore. We have spent $12 million in exploration at Long Canyon. For 2013, we have $16 million allocated.

Okay. Are the development plans still for the -- there was a date before 2017 or something like that. Is it still part of your plan?

That's still the plan in terms of once we -- we're submitting the permit later this year to the BLM. We would expect that the timing of that review, plus their own obviously internal reviews of the capital approvals would target first production in 2017.

Michael Dudas, Sterne Agee.

Gary, how do you think about, going forward, how you and the Board are going to allocate for external investment opportunities? Is it going to differ much than what Newmont has done over the past few years? On the other side, have you gone through a full review -- I know, you're going to be starting, I guess, officially next week, of the asset base and the reserves and how much more opportunities there can be for monetization or joint ventures or outright asset sales as you're trying to include those capital returns?

Okay. Thanks for that. I think in terms of external opportunities, there's -- we always scan the horizon, but at this moment, there's nothing that's on our radar screen. I think that's where I would put it. I'm also sensitive to having been involved in the mining industry for 30 years to how those things work and how you deliver value from those things. That's important. I think the internal portfolio -- it is something I've spent the last year looking at and looking at where our businesses sit. I've heard a lot of talk out in the industry of people looking to dispose of assets and that all these eager people are out there to buy them. My approach is to understand your assets, understand where the issues are, give the teams an opportunity to address those -- where we are in the high end of the cost side and work through that in the first instance before looking at what we might do in terms of asset disposals. So that's the approach you would see from me in this process. But clearly, you've got to take a look at what's delivering versus what's not delivering and get after it.

So you would think that would be a 2013 process for you? Or could we maybe have something from you sooner than that?

I think, from my standpoint, it's a process that's ongoing in terms of assessing the performance of our portfolio.

Finally, the longer term outlook for production from what Newmont put out last year. Are you willing to still commit to that? Or is that something again, that's evolving as you [earn] things out? What targets would be going forward relative to your re-found focus on [REITS] return on invested capital?

I know our longer-term view showed a range of 6 to 7 million ounces. I think the key piece that goes with that is, it's got to be profitable production. That's the focus that we have within the business. As we review that and review our longer-term plans, we would let people know if that changes that range. But really, our focus is on profitable production going forward.

Terrific. Just wonder if I can get a gold price forecast from Russell before he leaves? (laughter)

Thanks for that, Mike.

You're welcome.

Long-term bullish as ever. Short-term, clearly, some headwinds, a lot of liquidation. Maybe what you're seeing is some weak [ends] being margin called out. But, yes, we can't run this business on the quarter as you know, Mike. Long-term, we're still very bullish. The fundamentals are there. It's just a question of time before the debt issues start rearing their head again.

Brian MacArthur, UBS.

I wanted to go back to Batu Hijau for a minute. You did make a comment about potentially getting the final 7% sell-down, where you'd end up with 44% afterwards. Has anything changed with price, given all the discussions in Indonesia about new taxes, whatever? Is that a fixed in stone price as it drags on, or what's the update? We're just still waiting for them to tell you who you can sell it to?

Brian, I'm going to hand that one over to Russ to address.

You'll notice, he gives me all the fun ones here. (laughter) Yes, we have a contractual price. However, I would submit in reality, there's been a lot of water under the bridge over the last two years. If you think about it, either in the form of dividends out or capital reinvested. So at this stage, we have a firm contractual commitment. As Gary mentioned earlier, we have continued to renegotiate that. I would say that when this transaction closes -- or I should say, if and when this transaction closes, there will be a further discussion around price. I have no doubt in my mind.

Okay. Maybe just a follow-up on that. So again, we're going to finish the stripping. We're going to go into the bottom pit, have lots of good years through 2014, 2015, 2016. Maybe just a comment on what the longer term view is on Batu Hijau. Obviously, it will depend on all these other things. But, structurally, what the view is there, has that changed? I mean, we talked about Elang, everything else. Just what maybe your views are on that, Gary?

Yes, I think, clearly there's a Phase 7 stripping process to come in behind. So that is one that we're evaluating clearly, the economics. But right now, it would look attractive to come in and follow in behind with that. Looking at the timing, we'll still have what we've gone through this last time. We're going to go through a period of feast and then a period of working through the stockpile. Elang is one that we continue to drill. I was out at site last year to take a look at what's there. Great resource, but how we put that into practice will be the one that we've got to work through here over the next year or two and figure out what to do and what the next steps might be there.

Robert Reynolds, Credit Suisse.

Just to go back again to Batu Hijau. I'm wondering -- you mentioned, of course, 2015 you'll be into the full ore. How does the production look? I mean, in comparison to these high stripping years once you're back into the full ore?

I'll hand that to Russ.

Robert, if you go back and look at Phase 5, in I think it was 2009 and 2010, you'll get an indication, order of magnitude. As Gary said, it very much is feast or famine at Batu. The last time we were in the bottom of the pit was 2009 and 2010. That will give you an indication as to what the metal looks like. Obviously, there's minor variations when you get down to the bottom. It is interesting. As you get into the bottom, it is far more gold dominant than copper. So you tend to see the relative weighting of gold increase significantly when you're in the bottom of the pit.

Okay. So it would be sort of similar grade to those years? Or is that a different -- will that change?

Yes. I would say plus or minus 10% to 15%. That will give you an idea of what it will look like.

Okay. Then just moving to Boddington, [there] measured an indicated resource there declined by about 3 million ounces. I was just wondering if you could comment on what happened there.

Yes, happy to take that one on. Bottom line, it's the cost increases we've been experiencing in the business that we took into account in calculating the resource. We had to make a reduction. These are marginal ounces, as you can imagine at this gold price that dropped out. So that's what caused the reduction.

Were those ounces, were they -- would they require significantly more stripping than the ounces currently in the reserves? Or is it just the lower grade?

It's significantly more stripping. It would be basically the next shell in an ultimate pit, if you were to look at it that way.

Okay. Then a final question on Waihi. Is the Golden Link extension -- mine life extension, is that still sort of in your plan?

Yes, we're still moving ahead with that at this stage.

Thank you. I would now like to turn the call back to the speakers for closing remarks.

Okay. Well, thank you everybody. I appreciate all your questions and your patience here, as I go through my inaugural earnings announcement here with the group. I really just want to come back and reemphasize the appreciation I have for both Richard and Russell and their contributions. The team that's been putting together all the numbers that we go through here at the year-end, and most importantly, to all the employees and contractors across Newmont for all your efforts to continue to work safely. I'm looking forward to next week at BMO and a chance to talk more with our investors about the future -- great future here at Newmont. Thanks very much.

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