紐蒙特黃金公司 (NEM) 2013 Q4 法說會逐字稿

Good morning and welcome to the Newmont Mining fourth-quarter and full-year 2013 earnings conference call.

(Operator Instructions)

Today's conference is being recorded. (Operator Instructions)

I would now like to turn the call over to Kirsten Benefiel, Senior Director of Investor Relations. Thank you, you may begin.

Thank you, operator. And good morning, everyone. Welcome to Newmont's fourth-quarter and full-year 2013 earnings conference call. Joining us on the call today are Gary Goldberg, President and Chief Executive Officer; Laurie Brlas, Chief Financial Officer; Chris Robison, Executive Vice President of Operations and Projects; and Randy Engel, Executive Vice President of Strategic Development. They and other members of our executive team 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. We will be discussing forward-looking information which is subject to a number of risks. More information is included in our SEC filings which can be found on our website at newmont.com.

Now please turn to page 3 and I will turn it over to Gary.

Thanks, Kirsten. And thanks to everyone for joining us this morning. I welcome this opportunity to highlight the strong result our team delivered in 2013, from maximizing production and exceeding cost reduction targets, to bringing profitable new projects online and divesting non-core assets.

I also want to help you understand Newmont's potential in the years ahead. My goal is to clearly explain our stable production profile and the substantial cost reductions we are committed to achieving, and give you more specifics on what we have done to scrutinize and optimize our project pipeline. Finally, I will delineate the specific steps we have taken to improve our financial flexibility by modifying our dividend policy and securing commitments to restructure our debt.

Let me make our capital allocation priorities crystal clear. They are to maintain financial flexibility, invest in our top development prospects, and return capital to shareholders -- in that order.

The first record result for 2013 I will touch on is the safety. Turning to slide 4. Safety is fundamental to running an efficient business. And in 2013, we achieved our lowest total injury rate on record.

In human terms, this means that compared to 2012, 176 people did not get injured, 36 did not miss work due to an injury and 9 avoided a serious injury. In business terms, a strong safety record means we are operating at peak efficiency. Safety and social responsibility are at the heart of our employee value proposition and help us to attract and retain the best and the brightest.

Now I want to review the value proposition we offer investors. Turning to slide 5. Newmont is the premier US-based gold-mining company. And the value we offer shareholders is grounded in our operational, financial and strategic acumen.

Starting with our operations, we have a strong asset portfolio, with 70% of our production derived from Australia, New Zealand and the United States. We are managing our portfolio to deliver stable production of about 5 million ounces of gold per year over the next three years, with 90% of our revenues coming from gold. We are also relentless in our work to improve cost and efficiency.

I brought in two world-class mining experts in and tasked them with delivering a step change in operational performance; Chris Robison, our Head of Operations, and Scott Lawson, our Head of Technical Services. They were responsible for leading our team to achieve cost reductions of nearly $1 billion in 2013. And we will apply that same expertise and discipline to achieve at least another $600 million to $700 million in savings from 2014 to 2016.

Turning to our balance sheet, we have taken decisive action to maintain financial flexibility in a challenging price environment. Our new CFO, Laurie Brlas, is also a mining veteran, and led our efforts to reschedule our debt payments and revise our dividend policy to improve financial flexibility. Laurie's job is to keep us focused on delivering against our capital allocation commitments.

One further point of clarification -- we do not believe that issuing equity to pay off debt is a sound business practice, and we have no intention to do so. Finally, we have reevaluated and reinforced our approach to maximizing the value of our investments and our portfolio.

You all know Randy Engel, our Head of Strategic Development. Randy has established a more rigorous approach to screening assets and opportunities based on their contribution to value, as measured by NPV and return on capital employed and mine life, as well as their impact on our portfolio cost and risk profile.

We now view everything through this lens, which has helped us to prioritize our best organic development opportunities and move forward with divesting assets that are not a good fit with our strategy. We realized nearly $600 million by divesting non-core assets in 2013.

With that clarification on how we create value, I'll turn to the specifics on what we delivered in 2013. Turning to slide 6. Last year we committed to improving costs and efficiencies by $500 million to $750 million by 2015, and delivering on our production goals. I am pleased to see the team met and exceeded these commitments.

First, we lowered consolidated spending by $966 million compared to 2012, and reduced our all-in sustaining costs by 6%. This was critically important in light of the 16% reduction in gold price we experienced last year.

Second, we achieved the top end of our gold production guidance of 5.1 million ounces. Third, we brought our Akyem and Phoenix copper leach projects into full commercial production.

We've all seen a lot of mining projects run over on costs and schedule. I am proud of our team for delivering these two projects safely, on time and on budget. And for the work that they did to re-evaluate and optimize our project portfolio in 2013 so we can maintain this industry-leading standard.

Finally, the flipside of building a stronger portfolio is divesting assets that no longer fit the strategy. As I mentioned, we realized nearly $600 million in 2013 by divesting non-core assets. And this work continues.

Drilling into the specifics of our cost performance, on slide 7, we reduced our consolidated spending by 14% or nearly $1 billion in 2013. This figure excludes impacts related to stockpile and ore on leach pad write-downs, which Laurie will address later.

As you can see on this chart sustaining capital reductions are the largest component of this reduction, at $702 million. The next largest reduction was in our advanced projects and exploration area where we reduced spending by $235 million.

It's important to note that these are sustainable improvements. We aren't just deferring our spend to a future date. I also want to underline the fact that we still have more value to extract in this area.

Turning to slide 8 for details on our 2013 production performance, we increased gold production slightly in 2013 compared to 2012, primarily through very strong fourth-quarter production in Nevada and particularly in Africa. We're steadily increasing production in Australia and New Zealand through mainly productivity improvements at Tanami and higher grades at Waihi, and consistent delivery in South America. In addition to delivering on our production commitments, we delivered the two new projects on time and on budget at Akyem and Phoenix Copper Leach, which will produce about 400,000 ounces of gold and 9,000 tons of copper, respectively, in 2014.

Finally, we began work on our Turf Vent Shaft in Nevada in 2013. This project will add up to 150,000 ounces of gold production per year, starting in late 2015, by providing access to higher-grade ore at lower costs. Lower prices in 2013 affected our reserves and resources, but we also improved our average grades.

Turning to slide 9, we declared total gold reserves of 88.4 million ounces in 2013, down from 99.2 million ounces in 2012. Reserves were calculated at $1,300 per ounce, down from $1,400 last year.

The positive effect of our sharper focus on value was a 7% improvement in the average gold grade of a reserve base. We came close to offsetting depletion by adding more than 5 million ounces of quality gold reserves, including 1.1 million ounces at Tanami, 1 million ounces at Long Canyon, and 500,000 ounces at Merian, all at grades higher than our business average.

Copper reserves decreased from 4,300 tons to about 3,700 tons, mainly due to planned revisions at Boddington and lower prices. Copper reserves are calculated at $3 per pound in 2013 compared to $3.25 a pound in 2012.

We also improved the value of our project pipeline in 2013. Turning to slide 10. Our short-term project pipeline includes investment opportunities that represent more than 1.5 million ounces of production at competitive costs. The most advanced include Merian and Surinam, where we recently signed a mineral agreement with the government and improved project economics.

This project represents an additional 400,000 to 500,000 ounces of gold. And we will decide whether to proceed in the second quarter of 2014. This project is value-accretive and gives us a foothold in the highly prospective Guiana Shield area.

Long Canyon is the only major gold discovery in Nevada in the last decade. In 2014 we will complete feasibility studies for an optimized and reduced capital Phase 1 mine that could deliver approximately 150,000 ounces of annual production. We expect to reach a decision to proceed in early 2015.

Finally, we are exploring two expansion projects in Ghana, the Ahafo mill expansion would optimize throughput and help counter the impact of the lower-grade ore we are currently mining. This investment could add approximately 200,000 ounces of annual gold production. The Subika underground mine would improve ore grade, and could add approximately 200,000 ounces of gold production annually. We will reach a decision to proceed with either one, both or some combination of these projects in 2015.

I also want to give you more specifics on our exploration pipeline. Turning to slide 11. While we've reduced our exploration spend we have certainly not abandoned this core capability. In fact, of forecasted 2014 production 75% was discovered by Newmont geologists.

Our strategy is to focus on high-value opportunities from near mine to generative exploration. A few examples of exceptionally high-grade finds include Exodus and Bull Moose, which are near our existing Carlin underground mines in Nevada.

Maqui Maqui, which is within our Yanacocha operations in Peru; Subika underground, which is directly beneath the Subika open pit in Ghana; and Federation, which is adjacent to our Tanami operation. These prospects are expected to add higher-grade material to our inventory in 2014. It's still early days and we'll keep you informed about our progress.

Before turning it over to Laurie, I'll provide a brief update on Indonesia on slide 12. As you know, Indonesia's proposed export ban on copper concentrates has been postponed from 2014 until 2017.

In its place, the government has introduced new regulations on export permit conditions and a progressive export tax that is in direct conflict with our contract of work. We continue to meet with government officials to seek clarity and a mutually acceptable resolution.

Earlier this week the Gresik smelter resumed operation after a maintenance shutdown, and we expect to ship our first concentrate to them next week. We also have contingency plans and other remedies in place if we cannot resolve our differences. Our ultimate goal is to restore stability in the short term and protect asset value in the long term.

With that, I'll turn it over to Laurie to discuss our financial performance.

Thanks, Gary. Thanks to everyone for joining us this morning. I'll begin on slide 14.

As you can see from the results we reported last night, the actions we are taking to optimize costs are clearly helping to offset the effects of an approximately 16% reduction in gold prices this past year. Comparing 2013 with 2012, we delivered revenue of $8.3 billion, down 16% due to lower commodity prices. On a GAAP basis we reported a net loss from continuing operations of $2.8 billion as strong operating performance was offset by $4.4 billion in asset write-downs.

Adjusted net income was nearly $700 million, or $1.40, per share, down from $3.71 per share in 2012, primarily due to the reduced gold price. Cash flow from operations was very strong at $1.6 billion for the year. This is clear evidence of the outstanding efforts of our operators to manage costs in the current challenging price environment.

Turning to slide 15, we see the impact of asset impairments and NRV adjustments on our net income for the year. I would like to walk you through the reconciliation to adjusted net income.

Full-year earnings per share on a GAAP basis was a loss of $4.94. We experienced a total of $6.88, net of taxes and minority interest, for impairments and revaluations. These write-downs were largely attributable to reductions in assumed long-term gold prices.

For accounting impairment testing at year end, we assumed $1,300 per ounce of gold and $3 per pound of copper. $5.01 net of tax is related to impairments of property, plant, mine development, and other long-term assets, primarily at Boddington in Australia and Long Canyon in Nevada.

The same factors that impacted these operating assets also affected our deferred tax assets. As a result, we recorded a valuation allowance with an impact of $1.07 to earnings per share. When calculating adjusted net income we also exclude the gain on sale of assets, as that is nonoperating, as well. Thus, we ended the year with adjusted net income of $1.40 per share.

We also had a charge of $1.11 related to the revaluation of stockpiles and ore on leach pads. Approximately $0.61 of this is attributable to gold and the remaining $0.50 to copper. Adjusted net income would have been $2.51 if you add the stockpile revaluations to it, as well.

Moving on to slide 16, the fourth quarter was a particularly strong quarter for us with all-in sustaining costs of $1,032 per ounce, down 14% over the prior year. Our gold CAS was $755 per ounce for the quarter, and it fell at the low end of our 2013 full-year outlook. And I do want to point out that these figures include the impacts of the NRV adjustments I mentioned.

Realized copper pricing for the fourth quarter of $2.99 was impacted by higher-than-expected treatment and refining charges at Boddington. Copper CAS of $4.02 was negatively impacted by the NRV adjustment.

For the 2013 fiscal year, all-in sustaining costs were down 6%, or approximately $73 per ounce from 2012. Realized gold and copper price for the fiscal year were down 16% and 14%, respectively. And CAS was up 12% and 89%, respectively. The all-in sustaining cost in CAS numbers include the non-cash impacts of NRV adjustments, which make it challenging to see the significant improvement in our costs.

Turning to slide 17, we can see the impacts of the NRVs on our reported costs applicable to sales more clearly. On a consolidated basis you can see that our CAS for 2013, excluding NRV adjustments, was in line with 2012 at $675, demonstrating that our commitment to reducing costs and implementing efficiency improvements is taking hold.

Total NRV adjustments included in CAS were $347 million for the quarter and $958 million for the full year. Across our regions we saw CAS either improving significantly or holding the line over the prior year. When Chris discusses operating results later, he will provide additional detail on how our regions delivered on our objectives. And he will focus on CAS excluding the NRV adjustments.

Now moving on to slide 18, as Gary mentioned, our capital allocation strategy is focused on three points. First, improving financial flexibility; second, enhancing our portfolio to focus on those assets with the greatest risk-reward profile; and, third, returning cash to our shareholders.

First, improving our financial flexibility remains a top priority for us. And we'll continue to take action to ensure we improve our balance sheet position. The outstanding focus in 2013 shows in the numbers and the actions.

We ended 2013 with $1.6 billion in cash and no borrowings on our $3 billion revolving credit facility. Even more important, we generated $1.6 billion in cash from continuing operations for the year, which includes $400 million in the fourth quarter, the quarter with the lowest realized gold price of the year.

You may remember that three months ago I was very pleased to report our first quarter of positive free cash flow in two years. I'm even more pleased to report that we did it again in the fourth quarter. With two straight quarters of positive free cash flow behind us, we clearly have turned things around.

We're cognizant of our debt requirements, as well, and are focused on reducing debt and taking other actions to improve our financial flexibility. Yesterday we announced our success in obtaining commitments for a term loan of $575 million, which I'll discuss shortly.

We also looked to rationalize nonstrategic assets and interest as a source of additional financial flexibility. In 2013 we divested approximately $600 million in non-core assets. All of these actions have served to significantly improve our financial flexibility.

The second element of our capital allocation policy is to take actions that will enhance our portfolio. Our assets remain the lifeblood of our Company, and we will continue to leverage the inherent strengths of our current portfolio and exploration strategy to drive production over the long term. And I'd like to note that while we believe it's prudent of the Company to evaluate acquisition prospects, we would only do so if such opportunities are accretive to cash flow in the near term.

Thirdly, while we remain focused on strengthening our balance sheet and looking at ways to enhance our portfolio, we are also committed to returning capital to shareholders through a gold-linked dividend that has been adjusted to the current realities of the industry. And I'll review our updated policy in a minute.

Moving on to slide 19, as Gary mentioned earlier, one of our core priorities is maintaining an investment grade balance sheet. Over the past last two days we announced two actions that clearly support that priority.

First we secured commitments from a group of lenders for a five-year term loan of $575 million. The proceeds are expected to be used to repay the $575 million of convertible debt maturing in July 2014. The term loan is structured to facilitate early repayment without penalty from free cash flow, as we expect to delever over the five-year period. This slide illustrates our revised maturities after considering the term loan, which positions us very well.

We've also instituted a revised dividend policy that allows for sustainable returns to our shareholders without compromising our ability to invest organically or maintain financial flexibility. We will continue to pay a dividend at a gold price above $1,200 per ounce, with significant leverage for shareholders as the price of gold rises. You can see the increasing dividend on this slide.

In summary, we are taking the right steps to strengthen our balance sheet through additional asset divestitures by reduction in the dividend payout schedule, and most importantly, maintaining an ongoing focus on generating cash through continued cost and efficiency improvements.

And I'll now turn the call over to Chris who will provide you with a regional update for 2013 compared with 2012.

Thanks, Laurie. And good morning to everyone. Moving on to slide 21, I'm very pleased with the performance our regions delivered in 2013.

In Nevada, fourth-quarter gold production increased 12% from the prior-year quarter due to higher tons and grade at Mill 6, higher grade at the Juniper mill, higher grades at Phoenix, as well as higher Leach production at Carlin North area and Immigrant. This was partially offset by lower royalties paid due to lower metal prices and higher inventory builds.

Full-year production over the prior year was flat. And exclusive of impairments CAS was $642 per ounce for the year. The region delivered exceptionally well on the all-in sustaining cost front, reducing all-in costs by 8% to $964 per ounce.

On the project side, we're very pleased the Phoenix Copper Leach project achieved commercial production on time and on budget in the fourth quarter. This project will add 9,000 tons of copper production each year.

Moving south, on slide 22, Yanacocha's fourth-quarter attributable gold production decreased 21% from the prior-year quarter, mainly due to planned lower gold Leach production resulting from lower grades. Yanacocha's CAS per ounce increased 35% from the prior-year quarter due to leach pad write-downs and lower production.

Excluding impairments, South America's CAS for the year was $546 per ounce, slightly up from $505 per ounce prior year. South America production is down 20% over prior-year, as planned. However, despite reductions in production, the region achieved a 6% improvement over prior-year all-in sustaining costs, coming in at $1,032 per ounce.

Turning to slide 23, our Africa region delivered strong production and a reduction of 19% in all-in sustaining costs over 2012, and the successful startup of the Akyem operation. Ahafo fourth-quarter attributable gold production increased 32% from the prior-year quarter, due to higher ore grade and throughput.

Ahafo's CAS per ounce decreased 27% from the prior-year quarter due to lower milling costs and higher production. Production from the region increased 25% over prior-year due to the successful ramp-up at Akyem in the fourth quarter delivering 129,000 ounces, well above our expectation of approximately 50,000 to 100,000 ounces for the year. I commend the team for delivering this project on time and under budget.

Moving to Indonesia on slide 24, Indonesia production was down and costs up over prior year, as expected, as the Phase 6 stripping campaign remains underway. We anticipate reaching the higher grade Phase 6 ore in Q4 of this year.

Fourth-quarter attributable gold and copper production decreased 14%, and increased 38%, respectively, from the prior-year quarter due to lower ore grade from gold and higher ore grade from copper, as well as higher copper metal recovery. CAS increased 51% per ounce and 57% per pound, respectively, due to stockpile write-downs. Excluding stockpile write-downs, gold CAS was $927 per ounce for the full year.

Finally, we move to Australian and New Zealand on slide 25. I recently visited all of our Australian and New Zealand operations, and was extremely pleased with their efforts to reduce costs and improve productivity. This is particularly evident in our Tanami and Waihi operations.

Fourth-quarter attributable gold production increased 5% from the prior-year quarter primarily as a result of higher ore grades and higher throughput. Other Australia and New Zealand CAS per ounce decreased 23% from the prior-year quarter due to lower operating costs and higher production at Tanami and KCGM. Full-year gold production for the region is up 7%. And all-in sustaining costs are down 2% over prior-year due to improved operating efficiencies at Tanami and Waihi.

I will now turn the call back to Gary to discuss our outlook and the optionality our portfolio offers.

Thank you, Chris. If you could turn to slide 27. Newmont delivered in 2013 and we are committed to meeting or exceeding the targets we are presenting for 2014 through 2016.

We expect gold production to rise to between 4.8 million and 5.2 million ounces in 2015 and 2016. This would represent an increase of about 5% compared to 2014.

In North America, production is expected to rise from 1.6 million to 1.9 million ounces, mostly due to better grades and lower stripping ratios at Carlin and Twin Creeks, which represented an additional 300,000 ounces. We will also benefit from new production of between 100,000 and 150,000 ounces per year, starting in late 2015, as the Turf Vent Shaft is completed.

We expect Australia and New Zealand production to remain stable at 1.7 million ounces, with portfolio improvements offsetting lower production at Jundee, as that mine matures.

In Africa production is also expected to remain stable in the 700,000 to 800,000 ounce range. Akyem will deliver 400,000 ounces per year. And Ahafo will rebase to between 300,000 and 400,000 ounces in 2015 due to increased stripping as we execute laybacks.

In South America we are evaluating options to boost production through laybacks and optimizing our approach to developing the Conga project. In the meantime, we are projecting that production will decline by about 200,000 ounces as our deposit matures.

Finally, we are projecting gold production increases of about 200,000 ounces per year in Indonesia as we reach primary ore at the end of 2014. This represents about 6% to 7% of our overall gold production in 2015 and 2016.

Turning to our copper production outlook on slide 28, we also expect Batu Hijau copper production to grow by 50% to more than 100,000 tons in 2015. Copper production at Phoenix and Boddington is expected to remain stable at about 50,000 tons annually over the same period.

Turning to our cost outlook on slide 29, we surpassed our cost and efficiency improvement targets in 2013, and we'll will continue our strong trajectory over the next three years. Our outlook is for all-in sustaining cost reductions of approximately $600 million to $700 million, which will offset the effects of inflation and rising input costs, and keep our cost per ounce stable. We're confident that we can accomplish this, but we're not entirely satisfied and we'll continue to look for ways to boost productivity and efficiency.

Let's turn to slide 30 to look at what this means for gold costs. Gold CAS is expected to remain stable from 2014 through 2016, with improvements offsetting a 3% compound annual inflation rate. About two-thirds of our savings are expected to come from operating costs and efficiency improvements, while the remaining one-third will come from better throughput and recovery.

North American CAS is expected to benefit from higher grades, lower stripping ratios, and improved plant performance. In South America CAS will benefit from processing plant and facility consolidation that will help offset the impact of mining older deposits.

In Africa we will optimize the mine fleet and achieve other productivity improvements that will help offset the impact of lower grades and higher stripping ratios at Ahafo. In Australia and New Zealand efficiency improvements will focus on increasing mill throughput and improving maintenance and dispatch practices. Finally, the ramp-up of Phase 6 mining is expected to significantly improve both gold and copper CAS at Batu Hijau in 2015 and 2016.

Taking a brief look at our copper costs, as we turn to slide 31, our overall costs to produce copper will rise with production volume increases. More importantly, our unit costs will be reduced by more than 60% from 2014 to 2016, primarily due to efficiencies of scale in Indonesia. Our outlook also calls for reduced sustaining capital expenditures in the years ahead.

Turning to slide 31, as I clarified earlier we are taking a reasoned approach to these reductions. After three decades in the mining industry, I can promise you that drastically cutting sustaining capital to make the numbers look good in the short term ends up costing significantly more in the long term.

This page shows the total capital spend, which is predominantly sustaining capital. Development spending is down this year as we've completed Akyem and Phoenix Copper Leach, and reduced our spend at Conga.

Our sustaining capital spend is expected to increase by about $250 million in 2014 compared to 2013, due to increased spend on deferred stripping at Carlin and Twin Creeks, mine development at Tanami, and tailings expansion at Gold Quarry and Ahafo. That said, our total capital spend will decline by 30% from 2014 to 2016, exclusive of further investment opportunities.

We've had great success in improving project economics, at Merian in particular. And we will reconsider our development spend for the right opportunity.

The ultimate outcome of cost and capital discipline is a healthy business. Let's move on to the final slide and look at where we're taking Newmont in the medium term.

Our vision for Newmont is to lead the gold sector in creating value for shareholders. As we've demonstrated over the last half hour, we are on track to maximize value in the short term, and to capture the benefits of economic recovery and demand growth in the longer term. We have set a clear path to improve the business by building a portfolio of longer-life lower-cost assets, by delivering steady production, by making cost and capital discipline part of our DNA, by maintaining an investment grade balance sheet and financial flexibility, and by replenishing our growth pipeline.

Thank you for your time. And I'd be happy to field your questions now.

(Operator Instructions)

Patrick Chidley, HSBC.

Just a question on your projects, really, in terms of maybe you could supply us with a little bit more detailed information on what the plan is at Merian, for example.

Is it going to be a heap leach or a mill? What kind of strip ratio should we assume given the grade that you've got there?

Sure thing, Patrick.

Merian's actually near surface deposit. It would be run through the typical leach process after milling. And we're expecting between 400,000 and 500,000 ounces a year production over the first five years.

The ore in the first part that sits up near the surface is very soft ore, so you get actually very good throughput. And coupled with the grade that you saw, that's what helps to provide really good front-end production over the first couple of years.

Capital on that, in terms of what would be remaining to spend, as we've announced here, we now own 100% of that project. The government has the potential to take up 25% under its rights with our mineral agreement. But the capital overall remaining to spend is between $800 million and $1 billion.

Okay. And if you made the decision in second quarter or coming up soon then, would you start construction this year then? Is that how it is, or is there more work to be done?

Yes, that would be what we'd be doing. And it would take about two years from the time we make that decision to the time we'd get to first production.

I've been down there and obviously had a chance to visit our competitor's operation at Rosebel to take a look. And very similar sorts of conditions early on in the mine life.

Right, okay. And then just a quick follow-up question.

I noticed you added Elang 9.5 million ounces to the resource statement for the first time. Is that something that's developing into more of a project for you now?

At this stage, Patrick, we've added it into resource; but we're not doing a whole lot of work on it given some of the other things going on in Indonesia.

Okay, great. All right. Thanks a lot, and congratulations on the good quarter.

Brian Yu.

Good morning. And my question is more on Yanacocha.

It seems like from your guidance there is a nice one-time bump in production for 2015. If you could just give us maybe a little bit more detail on what's happening there.

Actually, Yanacocha we expect fairly steady production this year and next year, and then see the decline in 2016. Our attributable share down about 100,000 ounces, 200,000 overall.

The team there has been looking at different ways to be able to extend the mine life as we continue to progress the work on our water first strategy at Conga.

Then I might have misread it. It seems like your cash costs are dropping nicely in 2015.

If it's not production, can you elaborate on what's driving the cost reductions?

Yes. It's coming up with further cost reductions. I might ask Chris Robison to comment briefly on the cost reductions we're doing there.

Yes. While we've already seen some good cost reductions in Yanacocha project, we continue to focus there through our full potential project. And we see significantly more costs coming out in 2015. So that would be the main (inaudible) are pretty flat.

Okay. But then it comes back out? In 2016, costs are hitting close to 1,000?

In 2016, because we're not giving production out beyond 2016 with this, we've got some stripping we're doing in 2016 to do laybacks to provide production out in 2017 and 2018.

Got it. Okay. Thank you.

John Bridges, JPMorgan.

Thanks for the report. I just wondered, I know you can't say much in Indonesia, but what's changed in the last three months?

And then there's a story yesterday that some operators there had got export permits, but we understand that you didn't get any. What should we take from that?

Thanks, John, and good morning. I think a couple things.

In terms of what's changed in January, January 11 the government did come out and extend basically what they had in place for a potential export ban from 2014 to 2017.

We've spent a lot of time. I met last month at the World Economic Forum with a couple different ministers of Indonesia to talk about this situation and talk about potential paths to a solution. I think what I've seen happen here in the last day or two, you saw, I think it was five different groups that were granted export license.

One of those is the Gresik smelter, which we ship copper to. And that provides for them to be able to ship basically the refinery slimes or the anode slimes out to get processed and operate. The rest you saw were, I think, pretty much just nickel and nickel matt producers that received their licenses.

We've not achieved that and neither has our other competitor there in Indonesia, as we look at the situation. We are in discussions about what we might do that fits within their overall objectives and what we need and what we believe we're supported in with our contract to work.

I think the other thing you've got going on, we've moved, over the last three months, closer to the parliamentary elections, which are in April, and then a presidential election in September. And what you do have going on are the sorts of things that happen around an election that can cause some uncertainty. So we're working through with that at the same time.

And financially they're quite cash-strapped in that country, I believe.

I'm with you in terms of I believe having our operations running and contributing to the local economies where we operate for employees. The regional government, national government, is an important part in contribution to Indonesia.

Right. And then you said that you weren't going to issue equity to pay down debt.

But you've got the Merian project, you've got a decision on Long Canyon coming up. I'm just wondering the extent to which you feel you can finance that growth capital within the production and cash flow profile you've just detailed.

As we look, and you look at where prices are today in particular, we're very comfortable that Merian at this stage can be done within the cash flows we're forecasting over the next year or two. And we'll have to assess Long Canyon.

And that's why what we haven't done is built in any of these projects until they go through and get Board approval. But part of that process will be looking at what our capital is that's available. In the meantime, and as we've emphasized, we're still looking at other assets that may not be core and that we might be able to sell.

Okay. Thanks, Gary. Good luck.

Adam Graf, Cowen.

Just circling back to Indonesia, how much of Batu Hijau's planned 2014 production can be placed at Gresik?

Adam, thank you and good morning.

At this stage we're looking at, if our current plans are in place, it would be about half of our production for the year. We're looking at some contingency plans that would allow us to actually take our production back through the year, if it was needed. And then Gresik could handle up to 90% of our production.

And then as a follow-up to that, it seems to me that the 2009 mining law and the current export tax and ban violates your contract of work. And if nothing is going to happen politically to change that in the near term and you guys go to international arbitration, how will that unfold?

At this stage we're trying to avoid taking it to arbitration and have the discussions that we believe we can have with the government to resolve the situation.

If we are required to go to arbitration -- which I'd put towards the last resort, from my standpoint -- then we go through a process of filing. And actually we're then into a longer process, several months to a year, to work ourselves through an arbitration process. But at the same time, continuing to work to resolve the issue.

But at this stage, that's not at the forefront of our approach. Our focus is on having discussions with government officials to resolve the issue for the benefit of Indonesia and, obviously, for the benefit of our employees and our shareholders.

And just, finally, the Batu Hijau expansion that had been in the works, I'm assuming that's off the table until things are clarified?

Yes. What we have, at the end of this year we'd be getting back into primary ore for Phase 6. And then we're into that for the next two to three years.

The expansion you're referring to, Phase 7, we'd begin stripping for that towards the end of that 2016 timeframe. At this stage, plans to move forward with Phase 7 are pending resolving this issue.

I was also referring to the mill expansion to take total throughput at Batu Hijau to 175,000 tons a day.

At this stage of the mine life at Batu Hijau, we're not pursuing a mill expansion.

Thank you.

Jorge Beristain, Deutsche Bank.

I was wondering if you could disclose the terms of the recent $575 million bank loan that you obtained. And if you could just contrast that with perhaps why you chose to do that instead of a bond.

Okay. I'll have Laurie address that.

Sure. Thanks, Jorge.

The terms are very similar to our existing revolver. Very minimal covenant package. It's an example of the confidence our banks have in us, so I think that's a very positive statement.

And, really, we selected the term loan because of the prepayment without penalty and the goal to delever over the coming five years. With the bond we would not have that type of a luxury. So it was for that reason.

And what kind of interest rate are you paying?

LIBOR plus 1.5 points.

LIBOR plus 1.5, okay. And maybe a second question.

Just conceptually, you did mention that your intention is to delever. Rough numbers, we're looking at you guys earning anywhere between $200 and $300 an ounce of free cash flow just based on the all-in sustaining cost concept. But then your interest expense could be around $300 million, $350 million a year.

Just wondering what your projected tax assumptions are in 2014. Do you expect to pay any cash taxes?

Yes, we will be paying some cash tax; but it will be less than we paid in 2013.

Okay. And then if you did require funds, if you made a decision on Merian or any of these other growth projects, would the door be opened there to raise equity for those projects or bring in a partner?

How would you intend to fund some of those big cash calls if your free cash flow does not support it? Or would you simply just delay the project?

Jorge, in the case of Merian, and given where current conditions are, obviously it's got to be taken forward and receive Board approval. But we see Merian as one that we can cover within our current cash flows.

As we look out to 2015 and the decisions that we'll have in front of there, we'll have to assess the situation at that stage.

Great. Thank you.

(Operator Instructions)

Garrett Nelson, BB&T Capital Markets.

Thanks for the operational guidance for 2015 and 2016. That's very helpful.

I'm wondering what the guidance assumes in terms of production from new mines. Are the primary drivers basically higher ore grades at Batu Hijau and in Nevada in addition to the Turf Vent Shaft production in late 2015?

Thanks, Garrett, and good morning.

I think what we've included in here -- we don't have, for instance, the Merian project that I talked about. So, that would add production if we went forward with it in 2016. We don't have Long Canyon. We don't have the things I talked about at Ahafo, the mill expansion or the underground.

Those are all projects that once they come forward, we make a decision and would include them. Then we'd include those in the statistics and make the changes to our forecasts.

The only new project or major development project we've got going on that's showing up in the production numbers is the Turf Vent Shaft, which comes online towards the end of 2015. The rest of the swings you see are around primarily grade, as I mentioned, at Twin Creeks and Carlin, as that increases in 2015 and then 2016.

Okay, thanks. That's very helpful.

And then, based on these guidance ranges and current gold prices, it looks like your free cash flow generation could be significant over the next few years.

Is your first priority the Merian and Long Canyon projects? Or is it debt paydown? Or maybe are you planning a mix with those?

If your intention is deleveraging, perhaps targeting the 2017 and 2019 maturities, are you targeting any specific leverage ratios?

Lots of questions in there.

I think the key, though, comes back to what the priorities are. I think we'll look at development opportunities that generate free cash flow and look attractive. I think paying down debt does fit in there.

And then tying back to our commitment to shareholders to return a portion of our free cash flow back to shareholders, as we've demonstrated in our modified gold price-linked dividend, would be where our priority and targets are.

Okay. Do you have any specific leverage ratios in mind, though?

No, we don't really have a specific leverage ratio in mind. Continuing to work with the rating agencies and focus on the investment grade balance sheet. That's been our focus, and continuing to manage the debt.

And, as Gary said, it's really a balance of all those activities. I wouldn't suggest we'd put all of it into debt paydown, but a portion of it would be very good.

Okay, great. Good release. Thanks very much.

At this time, there are no further questions. I would now like to turn the call back over to Gary Goldberg.

Great. Thank you, Operator.

And thank you, everyone, for joining. There are three points I'd like you to take away from today's presentation.

We delivered nearly $1 billion in cost and efficiency improvements in 2013. And we have plans in place to deliver another $600 million to $700 million.

Second, we delivered two projects on time and on budget at Akyem and Phoenix Copper Leach. And we optimized our exploration and project pipeline. We will only invest in the most prospective development options, such as Merian.

Third, we've taken decisive action to maintain financial flexibility with changes to our dividend policy. And we'll apply strong rigor to our capital allocation process.

Thank you very much for joining today.

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