紐蒙特黃金公司 (NEM) 2013 Q2 法說會逐字稿

Good morning and welcome to Newmont Mining's second quarter 2013 earnings conference call. All lines will be on a listen-only mode until we open for question and answers. Today's conference is being recorded. If anyone has any objections, please disconnect at this time. I'd now like to turn the call over to Mr. John Seaberg, Vice President of Investor Relations for Newmont Mining Corporation. Sir, you may begin.

Thank you, Operator, and good morning to everyone. Welcome to Newmont's second quarter 2013 earnings conference call. Today our speakers are joining us from our offices in Elko, Nevada, as our Directors and executives have been out visiting our North America operations this week. Our President and CEO, Gary Goldberg, and other members of our executive team are on the line and will be available to answer questions at the end of our call.

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 in our SEC filings, which can be found on our website, at Newmont.com. And now I'll turn the call over to Gary in Nevada.

Thanks, John, and good morning, everyone. I'll start by discussing our safety performance. Safety is our most important value, and I'm pleased to report that we've kept our reportable injury rate at or below 0.5 injuries per 200,000 hours worked for three quarters in a row. Our goal is to eliminate all workplace injuries, and our projects team in Peru is proving this is possible by reaching a new milestone of 40 million hours working safely. As context, the small mines, such as Waihi, would have to run for nearly 40 years without a lost time injury to reach this milestone.

Unfortunately, this performance is overshadowed by the loss of our colleague, Corey Vasquez, in June. Corey was operating an underground loader at our Exodus mine in Nevada, preparing a stoke for backfilling. His loader traveled over the edge of the stope and Corey did not survive the fall. Our thoughts and prayers are with his family and coworkers, and a full investigation is underway.

I'll walk you through the highlights of our second quarter performance on slide 4. Our operations are performing in line with expectations and our cost improvement efforts are really gaining momentum. Our quarterly revenues were $2 billion, and cash flow from continuing operations was $293 million, or $0.59 per share. We reduced spending by $362 million, or 10% compared to the first half of 2012, excluding development capital. Our capital expenditures were also down $458 million, or 29% compared to the first half of 2012. In accordance with US GAAP, we wrote down the value of our assets, stockpiles and ore on leach pads by $1.8 billion on an attributable basis, net of taxes. Tom will walk you through the details later in this presentation. Including these write-downs, our production, CAS and all-in sustaining costs remained in line with guidance.

I'd like to now taking minutes to cover what we're doing to strengthen the business for all cycles, and turning to slide 5. We've been taking action to respond to the volatility we face today. At the same time, we believe that the long-term gold and copper demand outlook remains bright. Our work to build a more resilient business includes accelerating the pace and magnitude of our cost and efficiency improvements; strengthening our fundamental technical skills, from resource modeling through reclamation; optimizing our portfolio, exploration strategy and project pipeline; and investing in only our most promising growth opportunities; and finally, preserving financial flexibility.

Let's turn to our production performance for the quarter, summarized on slide 6. As we recently announced, second quarter gold and copper production was in line with the prior year and sales were slightly higher. We remain on track to meet full-year guidance of 4.8 million to 5.1 million ounces of gold by year-end, and we expect a stronger second half performance due to improved mill throughput here in Nevada and new production at Akyem in Ghana. Copper production in the second quarter was in line with our plans and we are maintaining our annual outlook of 150 million to 170 million pounds of production.

Let's turn to slide 7 to see the regional details. North America gold production is in line with the second quarter of 2012 and, as I mentioned, expected to improve as the year progresses. Gold production at La Jera Dura in Mexico was down for the quarter, due to lower leach recoveries. Mexico production will be lower for the balance of the year due to a land dispute, and we have adjusted our attributable gold production outlook for La Jera Dura down 25,000 ounces from original guidance. Australia and New Zealand delivered higher production compared to the previous year's quarter and compared to plan. This performance was driven by the team at Tanami, who delivered higher mill throughput and higher grade to exceed 2012 production levels. I'm pleased with the work that Carlos Santa Cruz and his team are doing to improve our operational performance in the region.

As expected, South America production was lower than second quarter due to the ramp down of mining at El Tapatio. In Africa, gold production was slightly higher than the prior year, on the back of higher mill throughput and recovery. And finally, in Indonesia, gold production was negligible, as we continue with our Phase VI stripping, which we expect to be into ore later in 2014. Copper production decreased 11%, due to lower mill throughput at Boddington and lower throughput and grade at Batu Hijau. These production levels were in line with our plans.

Absent the impact of write-downs, our all-in sustaining costs remain in line with expectations. Turning to slide 8. This water fall chart shows the factors affecting our all-in sustaining costs. We continued to reduce our costs and have lowered our overhead and sustaining capital by about $250 million compared to the second quarter of last year. I'm pleased to report that our all-in sustaining costs are tracking 10% lower than the second quarter 2012 and in line with guidance for 2013, excluding the write-downs. We have also updated our full-year guidance to adhere to the recently released World Gold Council definition of all-in sustaining costs. The only real change is that we now include reclamation and remediation cost in the metric. We also presented our regional all-in sustaining costs in our 10-Q filing.

Let's turn to the slide 9 for more detail on capital spend. So far this year, we've reduced our capital by 29% compared to 2012. Key elements of this include completing the Emigrant project here in Nevada, which is now producing about 85,000 ounces of gold per year, reduced spending at Conga with the completion of the Chailhuagon Reservoir, a milestone in our water first development approach. We're nearing completion of our [Achim] project in Africa, with first production expected in Q4 of this year, and reducing our sustaining capital spend across the entire business. This is reflected in our lower overall capital spending guidance for 2013.

I'd now like to hand over to Tom Mahoney to walk you through our financial performance, beginning on slide 10.

Thank you, Gary, and good morning. We reported quarterly revenues of $2 billion and operating cash flow of $293 million, or $0.59 per share, for the quarter. Taking into account the non-cash impairment, this translates to an adjusted net income of $0.45 per share.

Let's turn to slide 11 for more detail on those impairments. Attributable impairments to our long lived assets at Boddington and Tanami totaled approximately $1.5 billion, net of tax. We also realized attributable impairments to our stockpiles in ore and leach pads of $272 million, also net of tax. The same factors that impacted these operating assets also affected our deferred tax assets. As a result, we recorded a valuation allowance of $535 million to reflect the uncertainty of our ability to utilize future foreign tax credits.

Now I'd like to cover how write-downs impacted our costs applicable to sales, and turning to slide 12. Excluding the impacts of impairments, CAS for the quarter was $724 per ounce, in line with our original outlook. This number was impacted by higher input costs and inventory change, partially offset by higher sales and lower royalties, due to lower gold prices.

Let's turn to slide 13 for the regional impacts. Stockpile write-downs affected South America, Australia, New Zealand and Indonesia. Once again, excluding the impact of these write-downs, we are in line with our original guidance for the year. Higher numbers in Indonesia are related to the lower production levels as we continue Phase VI stripping at Batu Hijau.

Moving to slide 14, despite the volatility facing the sector, Newmont retains its financial flexibility. We continue to manage our liquidity position and capital structure to an investment-grade profile. Most of Newmont's debt is long dated with favorable terms. We currently have approximately $5 billion in available liquidity, an investment-grade credit rating, and ratios that demonstrate the health of our balance sheet. Our focus is on preserving financial flexibility throughout price cycles.

Financial strength also allows us to return capital to shareholders. Turning to slide 15, our dividend policy increases and decreases as the gold price rises and falls. The second quarter average London PM fixed price of $1,415 per ounce resulted in a $0.25 per share dividend, as approved by our Board. With that, I'll turn it back to Gary.

Thanks, Tom. Turning to slide 16, making Newmont a more resilient business has been my top priority since I started as CEO in March. I'll take just a minute to walk you through what we're doing to accomplish that. In July, we realized net total proceeds of CAD608 million through the sale of our Canadian Oil Sands interest. The transaction represents a net gain of $300 million, which will be recorded in the third quarter.

We've also launched an intensive operational improvement program called Full Potential. This program has been deployed at our major sites and is designed to deliver a step change in cost and efficiency improvements. You might recall I mentioned that at the Q1 earnings call. Having spent time here in Nevada operations this week, I'm pleased to see the enthusiasm and progress that Tom Kerr's team is making. We are also on track to reduce our corporate workforce by more than one third, and we are also addressing our regional overhead costs. Finally, we are taking steps to optimize exploration, procurement and projects.

Capital discipline is another aspect of our work to build a more resilient business, and I'll update you on our major projects on slide 17. In Nevada, the Turf Vent Shaft project leverages existing infrastructure to increase production. Our Phoenix Copper Leach project will begin production in the fourth quarter this year, converting waste to ore and adding incremental copper production. We are progressing Long Canyon through ongoing exploration and expect to declare first reserves with our 2013 results. In South America, the Water First approach at Conga continues, and we completed construction of our first reservoir this quarter. The mineral agreement for the Merian project was approved by Suriname's National Assembly in June, and we continue to work with the government to progress this project. In Africa, Achim is nearing completion and construction remains on schedule and on budget. First production is expected by the end of this year.

I'll now turn you to slide 18 to wrap up. While we cannot control metal prices, we are managing what we can control. I am pleased with our progress toward improving operational costs and efficiencies, raising our technical standards and advancing only our most profitable projects. I also remain committed to preserving the financial flexibility we need to address our challenges and make the most of emerging opportunities. Newmont's executive team and I will be hosting our annual Investor Day on August 1 in New York to discuss our strategy, goals and projects in greater detail, and I hope that you will join us there next week. Thanks very much; and Operator, please now open the floor to questions.

Thank you.

(Operator Instructions)

John Bridges, JPMorgan.

Morning, everybody. Thanks for the opportunity. We put a note out on hedging a week or so ago, and I've not heard a death threat yet, so I thought I'd push my luck here. You mentioned that you can't affect the metal prices, but for a short period, maybe you could. Are you going through a weak spot in the second half of this year before you get the bigger revenues coming in from Ghana and then in 2015 from Batu Hijau? Have you thought about protecting your metal prices just a little bit?

John, thanks for the question. Of course, we discussed that potential, but that is not something we're looking to do. I think we've got strong business fundamentals underlying. And sure, there's cycles happening in price, but looking to hedge our gold or copper positions is not something we're considering taking on at this time.

Okay. On a bit of an accounting question, the impact of the write-downs on what DD&A we should use going forward?

I'll ask Tom to provide that. We do have the guidance, and we've shown that both with and without the impact. We just have to refer you to the right page. Page 6 of the earnings announcement last night has an update on DD&A. Excluding write-downs, we're still looking at $1.050 million to $1.1 million. Including the stockpile, write-downs increases that $1.25 billion to $1.3 billion.

John, it's Randy. And that's on a consolidated basis. You'll see the attributable equivalent of that next to it.

Okay. Thanks. I was a bit sleepy when that came through. Thanks, guys. Best of luck.

Thanks, John.

David Haughton, BMO.

Good morning, and thank you for the update. With the impairments taken on the stockpiles, at what price do these -- what price is imputed in the current carrying value of these stockpiles?

The carrying value that we're suggesting, first of all, we used the long-term gold price assumption of $1,400 per ounce of gold and $3 per pound of copper. So that filters through in terms of the valuation that we use for the impairment.

And what would be required, what events would be required for you to revisit those carrying values? Would it be a lower metal price than where we're at today, for instance, or is there some other trigger that would make you revisit these numbers?

Where we sit today, it would primarily be a change in metal prices. If we did have a substantial change in our operating costs, then that could also affect our valuations.

Okay. Changing now to the operations, which performed pretty well with you for the quarter, just thinking about the development projects, you've got Phoenix coming up with the Leach, do you intend to report that separately so that we can get an idea as to what the contribution is of the investment there?

David, at this point, we'd be including it as a byproduct in the region. So it is something we've been discussing in terms of making sure we've got visibility in what the actual production of copper is from the Leach, as it's a pure copper stream there.

David, we'll probably do a trend. We could do something supplemental, and try and break that out supplementally.

Yes. So it looks like a reasonable investment there, so it would be good to get the visibility that Gary had referred to.

Now switching over to Merian, what's required for you to go ahead with your next decision? And what would that next decision be? Undertake the feasibility and then think about the construction? What sort of timeline could we be thinking about there?

Thanks. Good question, David. With Merian, as I mentioned, we received Parliamentary approval of our mineral agreement. We're now awaiting, basically, signature for us and the government to sign that agreement. That then triggers some other government approvals that we'd be waiting for. And once we receive those, we'd be in a position to assess, given where we see the current prices in the marketplace, whether this is a project that we're ultimately going to move forward with now or whether we make a decision to hold. I think part of it, like people have been, we're waiting to see where near-term prices settle out at before we move forward with the project. So we're continuing at a low level of spend in the region, until we can get really the government approvals and then be in a position to make the final call on economics. So we're done. The feasibility study is done and that's been submitted to the government for their review, and all that work's done.

All right. Thank you for the update.

Thanks, David.

Patrick Chidley, HSBC.

Hello. Good morning, everybody. Just in terms of cost reductions that you mentioned, can you outline what areas are you seeing these cost reductions coming in? I know you've reduced overhead, and it seems like a large amount of it is reductions in sustaining capital. So are there any other input costs coming down that you noticed such as, I don't know, contracts and cyanide and that sort of thing?

I think we're covering it, really everything in the process here, Patrick. I think I outlined last quarter some of the things at Boddington. They're looking right through ultimate pits, pit design, changing our strip ratios, as we look to still have the step out capability, but shrinking in the medium term the size of the pit, which gets back to mining efficiencies. We're looking at really all the operations in terms of what we might do on improved recovery. We met with the Full Potential team here on Wednesday at Carlin, and they're looking at ways to improve efficiency and recoveries at Mill 5 and Mill 6. So that's an example, where you don't have to do any mining. If you get extra recovery, that flows right through to production.

In terms of input costs, we are reviewing our supply contracts for cyanide, tires, diesel, all explosives, all the main input costs, and going back to our vendors where we feel that those costs are out of line with what current market conditions are for us. So we're really on top of what you outlined in terms of overhead cost. Sustaining capital, it's about making sure we're spending the right amount and maybe getting a little more out of what capital we do have in place before we replace things. So everything's on the table, Patrick.

So in terms of what you're seeing in the market for market prices for input, are you seeing those coming down, explosives, cyanide, that sort of thing?

I think we've seen a trajectory in the last couple years of those going up, probably higher than what, at least, I think they should have been going up at. Ao we're revisiting all of those to bring those back down in line with what is a more reasonable amount.

Right. And then in terms of the reduction in sustaining capital, is that sustainable itself? Or is it just you're pushing your -- you're not replacing certain equipment, and maybe next year we're just going to see that come back?

That's a good question. And it's part of, as we go through our planning process looking forward, I want to make sure it isn't just turning into the roll in the carpet, as I say to folks here, that we roll the carpet out to 2014 and have the bumps then. So it's got to be things -- and it really is putting a priority, what's critical, what are things that might have been nice to have that absolutely we have to take out of the plan going forward?

Right. You mentioned higher grades at Tanami. And looking at the potential mine life of some of the mines, Tanami, Jundee, [Anacotcha], what are you thinking about mine lives now, if we get to the end of the year here and you're having to mine at higher grades, do we really -- are we really looking at very much shorter mine lives here?

At this stage and given current conditions, we haven't really changed significantly the cut-off grade parameters. So we're still mining generally to those cut-off grade parameters. At Tanami, it really was a matter of actually intersecting higher grade ore at the deposit itself at this part of the sequence, which was in the plan. So it wasn't a change from the original plan.

Okay. Good. All right. Well, I'll hand over to someone else. Thanks very much.

Great. Thanks, Patrick.

Stephen Walker, RBC Capital.

Thank you very much. Just a question, circling back as follow-up on David's questions on the carrying value of the write-down for the Leach and the stockpiles, you booked reserves at $1,400 at year-end and I'm just curious, did you consider adjusting the carrying value of the Leach and stockpiles at year-end, and was it just the sharp drop in gold price that was a catalyst for this adjustment now?

We reported reserves at $1,400 gold and $3.25 copper at the end of the year. For business planning purposes, and we would have listed this in our guidance at the beginning of the year, we used $1,500 gold. So at the $1,500 gold price, that we ran that through the stockpiles and it didn't have an effect on stockpile valuations or asset valuations.

And again, out of curiosity, I didn't go through the Q yet, but what's the carrying value of the Leach and the stockpile accumulated of now?

As of the end of June, I show that at just under $3.5 billion.

And just as a follow-up, if you drop the gold price by $100, $1,300, what sort of delta could we expect on the potential drop in value? If you don't have it at your fingertips, that would be an interesting number to know, what $100 change does.

I'll point you to a place in the Q, page 70 -- actually, I've got the wrong page. We'll have to find the page. But it is in the Q. What we did was give a 10% reduction to the $1,400 price and to the $3 gold price. And the overall range we gave was $650 million to $700 million in the Q. And that's on a consolidated, before tax basis. So it doesn't have that back to an attributable or after-tax basis. When you look at that, the biggest impact that we'd see is about two-thirds of that is at Batu Hijau.

Okay. That's very helpful. Thank you for that. And just one last question, at Conga you finished the one reservoir, and I believe you there has been some local protests on and off here over the summer. Are your plans still to continue with the second reservoir and the capital spending that was laid out at the beginning of the year?

Thanks, Stephen. We've been working with the team. And I have to say, here's another area where I'm very pleased with the work the team have been doing to get out in the community and to really clarify the work that we've been doing in building Chailhuagon and the progress we've made. We have had, and you've seen the reports there around, concerns and protests around dewatering a lake that's called Perol. What we've done, we finished the Chailhuagon Reservoir and we've now moved to building and completing an access road between Yanacocha and Conga, so we can actually reduce the impact we have on driving through local communities to access the site. That looks to take through the middle of next year, and then beyond that would be the work to construct the Perol Reservoir.

We're really waiting, right now we don't have the permit to be able to dewater the lake into the new reservoir, so that's one of the key items. And of course, need to continue to work on getting local support. It is interesting to see that here just a couple weeks ago, there was a march in support of the project and in support of development in the Caha Marca region that went on. So it's nice to see that people are recognizing the impact that our business has in a positive way on jobs in the region, and we still remain sensitive and committed to our Water First approach at Conga.

Okay. Gary, it's a little early to be thinking about planning for 2014 and gold price assumptions, but in using $1,400 this year, you were slightly below the three-year trailing. And I'm just thinking, what are your thoughts looking out into 2014 with respect to gold price assumptions for reserves and resources? How conservative will you continue to be in how you look at what you're booking as reserves and resources?

You're spot on. It's early to make the commitment on reserves and resources, but as we're doing some preliminary work, of course, we look at a variety of different pricing scenarios to understand the impact on the business, both up and down, to make sure that we're positioning the business properly to work through the cycles. As we look to 2014, we're in the middle of the planning process with the regions and going through the details. So we've got them still working off the $1,400 price. Longer-term price for reserve and resource, you'll recall we had $1,600 as resource last year -- or this year, when we reported resource. And for planning purposes in the short-term, which is the next three years, we have them using a $1,200 price, not because we believe that's necessarily the right answer, but to make sure we're building some conservatism in, and understand the impacts here over the next two to three years, what that might look like. So that's one of the things that we're testing with the team in terms of pricing assumptions.

That's very helpful. Thank you very much, Gary.

Stephen, it's Randy. Just on your first question, the sensitivity, it's on page 76 of the Q, and the number is 10% change in the long-term metal price would result in a $650 million to $700 million change in the overall write-downs on the Leach pads.

The 3.5. Okay, that's helpful.

Yes. And that's before tax and minority interest.

Perfect. Thank you very much for that, Randy.

You bet.

George Topping, Stifel.

Great. Thanks. Hello, everyone. Most questions have been answered, but interested in the layoffs at Boddington. Will there be a production impact at some of these operations where you're laying people off, maybe lower production at lower cash cost, perhaps?

At this stage -- and I think that, George, good question, in terms of how it affects production. At this stage, we don't see it affecting the production here over the next couple years. I mentioned some of the redesign we're doing on the mine plans there. So we do look at the long-range stripping, what makes sense. But just like the question on sustaining capital, you don't want to put the carpet roll out one year and then get yourself into a bind stripping-wise. So we need and continue to make sure we're building in the right stripping patterns for the future. So I think what you saw there is really looking to drive efficiency. We're looking not just -- we need to make sure we've got the right folks working efficiently at the mine face, but also to make sure the organization structure is efficient. So some of what you may be seeing there is some of the support people that are there.

Right. And also I noticed you did a deal with [Varison] in Nevada. Is there scope at other operations to look at processing old dumps?

I think we're always open to look at opportunities, and they come and go from time to time. But bottom line, my view, it can't become a distraction to the main part of the business that we have, and it's got to add value. And so it's looking at what the impact is to the business.

Right. Okay. Thank you.

You're welcome, George.

Jorge Beristain, Deutsche Bank.

Good morning, Gary and team. Jorge Beristain with Deutsche Bank. My question is really how should we think about how you intend to fund growth CapEx into 2014. If we just take current spot gold prices and your latest 2Q all-in sustaining costs, you seem to be clearing about $200 an ounce of free cash flow, but that's before the payment of dividends and interest expense and taxes, which seem to be covered by that amount, but you're not able to really effectively fund growth CapEx. So I wanted to get an idea of what you are targeting for a growth CapEx number for 2014, or conceptually how you would view funding it? I did pick up that you sold this oil asset, so could be a source of funds. Would there be other portfolio rejiggering that you could see to free up funds to fund your next generation growth CapEx?

Jorge, this is Tom Mahoney. Good morning. When we look at our growth plan and our business plans, we obviously consider all the various sources of capital. And we continue to hold on the balance sheet marketable securities. One of the things that we also consider is the slightly longer outlook in terms of our production profile and business plan. As you would note, we have Akyem coming onstream in 2014, so that's going to help our production and our cash flows going forward, as well as the mining sequence at Batu Hijau. So again, we take all these into consideration. We feel we're well-positioned to fund growth capital, and we also would always have access to the debt capital markets, given our investment grade rating.

Okay. And in terms of the Conga asset, as you're still proceeding with this Water First strategy, if you get to a point where you decide not to develop that mine, would that be a triggering effect that could lead to further write-downs there, where you have to write off the value of the invested capital to date?

Jorge, yes. If we decided to discontinue moving forward with the Water First or development of the project, that would be a triggering event.

And roughly how much have you spent to date on Conga, and how much is pending?

I believe where we have the numbers today, it's about $1.5 billion year-to-date on a 100% basis. And depending -- that number -- and we'll have that detail next week -- so I'm thinking ahead to the slide on that. But we're in the $3.5 billion to $4 billion range for that, might be a little bit more.

Sorry. I just meant pending on the finishing of the water reservoirs.

Oh, sorry. Sorry. We'll have the details on that next week. We're looking -- basically, we finished the one. We have about $15 million to spend to complete this access road, and then we're looking at about an annual spend of about $40 million to $50 million a year to continue to do our ongoing social work, maintain the existing pieces of equipment we've got out in different locations. So we've pulled the spend back quite a bit on that, at this point.

Okay. Great. Thank you.

Thanks.

Anita Soni, Credit Suisse.

Hello. Most of my questions have been asked and answered, but could you just talk about the working capital changes this quarter and what those were driving off of and how you see that playing out in the next quarter or two?

Okay. I'm going to call -- we've got Chris Howson, our Controller, on the line there in Denver. Chris, can you address that question on working capital changes for the quarter?

Yes. So the -- we inventory costs into our inventories and then relieve those in the CAD. Those reflect the direct mining costs and eligible support costs. And then also relieve the depreciation of mining equipment into DD&A.

Okay. All right. Thanks. Thank you.

Okay. Thanks, Anita.

John Bridges, JPMorgan.

It's like a round about, isn't it? Just a couple of loose ends. I was pleased to see you're still spending on the bio reach down there in Peru. Are you getting anything from that or are you still building it?

We're just actually completing construction of the plant. The dumps have actually been placed, so the Leach pads for the -- where we'll test the different size materials have been placed, and we've actually got the bugs cooking, as I like to call it, but the bacteria that's used to break down and help release the copper. And that's moving along and we've started to circulate solutions. So we should have something more to report here later this year on how that's starting.

You're not having to give them oxygen, then?

Well, they have oxygen, but we're not going to do any extra oxygen injection, even though they're at altitude.

And then as you're in Nevada, any thoughts of cooperation with other parties down there on bringing costs down?

I think that's always something that is out there as a potential, but that wasn't the purpose of our visit.

Okay. Oh well, maybe next quarter. Thanks a lot, guys. Good luck.

Thanks, John.

Paretosh Misra, Morgan Stanley.

Hello. Good morning, everyone. Question on Indonesia. Any update on divestitures there at Batu Hijau, and any update on any discussions you've had with the construction of a smelter? I think some in the government were asking for it?

Good questions. In regards to divestiture, we continue to have our 7% stake that we have worked with the government of Indonesia to divest. And actually as of today, that most recent extension would have expired -- I got a note this morning, as our team's working there -- as you know, they've had some changes in the Minister of Finance, and are working through, and you obviously see lots of press here and there around it. What we've agreed today is to extend those terms and conditions that we agreed now several years ago for an additional six months, to see if they can find a path to be able to purchase and acquire that remaining 7%. So that work c continues.

With regards to the smelter, we do have several memorandums of understanding with smelting groups or potential smelting groups in Indonesia. We support the concept of being able to process concentrates in country. But at this stage, that's not something that we're individually pursuing, Newmont, in terms of building smelters. That's not where our core competencies are and that's not where we would want to invest our money.

Understood. And to the extent you know, has anyone completed any recent feasibility study to construct a smelter?

You know, I'm not across the details of where the different studies are at, so I don't know.

Got it. Okay. Thanks. And one final question. For 2014 CapEx, I think in the last call, I think Randy was talking about that number falling by about $0.5 billion. Any incremental thoughts on that?

I think at this stage -- and we'll be going through the plans more in detail here in the coming months, and we'll give a bit of a flavor next week where that stands. But a lot of that was tied to the completion of construction at Akyem, slowing of work at Conga. So that was the key areas. And we are continuing, next year you'd see similar spend, I think, here in Nevada with the Turf Vent Shaft being constructed.

Got it. Great. Thanks, guys.

Thanks.

Farooq Hamed, Barclays.

Hello. Thanks. Good morning, guys. Gary, earlier in the call you mentioned that you're going back through your planning process and you're using $1,200 an ounce for the next few years. I think that's what you said. So can you help me understand, how do you think about returns in that environment? When you say you're going to use $1,200, is that using some baked in return or is that breakeven? What's the thinking around that?

Well, we have our rates of return for projects and hurdle rates that are key, and those vary by the region. From my standpoint, we're still watching what's happening with gold price. Just like you saw with the reserve price, I'd like to build a little conservancy into the planning price assumptions to make sure that we've got some headroom and that we're not having to make big changes and shifts in mine designs and things like that. We are looking to maintain a cash flow positive operations as we go through that.

Okay. So just thinking that all-in costs, all-in sustaining costs, before interest and taxes and these things, is around $1,100, at $1200, we don't see much in the way of cash flow. That's why I was wondering, if we do see gold price weakness, do you see potential -- maybe the question then is do you see potential to bring that planning number down to a lower number than $1,200?

Exactly. And that's the whole purpose of things like the Full Potential I talked about, the changes in sustaining capital, the work on exploration that we pared back a bit this year, and advanced projects. Wo we -- it's early days and we'll still have -- working on the targets. But we are looking to more than offset inflation and also look to bring our costs down here, as we look at our plans for 2014, through the work I've been describing. And I've got good confidence. I've been pleased with how the teams in all the regions have been taking this up and going after and getting after it. They all see what's happening in the marketplace and are doing some good work to address it.

Okay. Maybe just a question on your exploration budget. Can you remind me how much of the exploration spend this year is on greenfields?

About 20% of the total spend that we show in there. So we show a range of $250 million to $300 million on a consolidated basis. Roughly 20% or so of that is on greenfields.

Okay. And would that be an area that you would consider an area to cut, if we do see some more gold price weakness later in the year?

We've done some trimming. And actually, Grigore Simon, who is our head of Exploration, and I have been looking at different alternatives and what we might do to make that spend more efficient, potentially investing with some juniors who actually maybe have a need for some support that way but have interesting prospects. So we are re-looking at how we manage that spend and how much we spend there.

Okay. No, that's helpful. Thank you very much.

You're welcome.

Brian MacArthur, UBS.

Good morning. The Australian dollar has moved a fair bit recently. Can you tell me what you used, in all of this analysis, what you did with the Aussie dollar? And again, I know you did have some hedging where we stand on that right now. Because obviously, a fair bit of these effects are at Boddington in Australia, so that's going to have a reasonably big impact.

Good question. And as we saw in the quarter, the Aussie came off. And actually, we saw a period at one point, it was below $0.90. For purposes of these valuations, we used a number in the AUD0.93 to AUD0.94 per US dollar.

Our hedge book goes out five years on that A dollar, and roughly, we're AUD0.92 is the rate we've locked in on hedge book. So again, if we look longer term on the A dollar, of you consider maybe a AUD0.95 exchange rate and factor in some of the impacts of the hedge book on the near-term, we're landing in that AUD0.9305 range.

And would that all be hedging all your cost, based on your original plans at all these mines at higher gold price, all those costs are hedged forward? So if you did cut back production, you've got a gain or loss there, depending on what happens? Or how much of that is actually covered, 100%?

It's a staged hedging program, so as we go further out on the business plan with some less certainty around the actual notional amount that we might be hedging, it trails off. So the near-term, I'd say the one-month horizon, for instance, we are hedged, say, 90%. But by, let's say a period of six months out, it's significantly less, so maybe 85% and then trails off from there. So we don't see ourselves being in a position of over-hedged on the A dollar at any point.

Great. Thank you.

Okay.

Adam Graf, Cowan and Company.

Thank you. Just a point of clarification. I noticed in the breakout operating data that it looks like you guys have included a line item for the write-downs for the individual operations in the production costs. And I was just a little confused, because the write-downs are below, on the P&L statement, the write-downs are below the gross margin, so I'm a little confused on why you guys are including these write-downs in the costs applicable to sales.

Adam, it's a good question. I'm going to have Chris Howson, because he's the financial expert -- my mining engineer's review of it, you've got the write-down on the assets which do go, as you say, below the line. With regards to the stockpiles, those do pass back through our CAS. But I'd ask Chris to clarify.

Yes. That's right. So the stockpiles coming through in those write-downs reflect the direct portion of mining costs and allocatable support costs, so those are really just a delayed operating costs that are coming through.

But they certainly don't reflect the cost of operations in the quarter.

That's correct, Adam. It doesn't reflect the true cash expenditure during the quarter, during the period.

Yes. Okay. That was a clarification. And since you guys are in Nevada, maybe you guys could give us some color on how much mine life there's left at Midas?

Midas is clearly one of our shorter lived assets here. We're looking at probably three to four years, based on our current understanding of the reserve and resource and what the most recent pricing --

Adam, it's Randy. That would be without any further investment.

Very good. Thanks, guys.

Thanks, Adam.

I'd now like to turn the call back over to Gary Goldberg for our closing comments.

Thanks, Operator, and thanks, everybody, for taking the time to join us today. It's interesting times in terms of where prices have gone, but I really, really am proud of our team across Newmont and how they've been responding and making sure that we position the business to be resilient for the future. Look forward to spending time with some of you next week to run through more details of the business and what I see as a great outlook for this business going forward. So thanks very much.

That does conclude today's conference. Thank you for participating. You may disconnect at this time.