紐蒙特黃金公司 (NEM) 2015 Q1 法說會逐字稿

Good morning and welcome to the Newmont Mining first quarter 2015 earnings conference call. Today's conference is being recorded. If anyone has any objections, please disconnect at this time. I would now like to turn the call over to Meredith Bandy, Vice President, Investor Relations. You may begin.

Thank you, Operator, and good morning, everyone. Welcome to Newmont's first-quarter 2015 earnings call. Joining us on the call today are Gary Goldberg, President and Chief Executive Officer; and Laurie Brlas, Chief Financial Officer. They and other members of our executive team will be available to answer questions at the end of the call.

Turning to slide 2, please take a moment to review the cautionary statement shown here, or you can refer to our SEC filings which can be found on our website, www.newmont.com. And now I'll turn it over to Gary, on slide 3.

Thanks, Meredith, and thank you for joining us this morning. Newmont made a strong start to 2015 and I appreciate the chance to tell you more about our performance.

In a nutshell, we continued to deliver safe and steady production at lower costs. We increased our free cash flow by nearly $400 million compared to the first quarter of 2014. We advanced projects in Nevada, Suriname and New Zealand, and announced plans to build a new mine at Long Canyon; and we continued to strengthen our balance sheet, as our improved performance allowed us to prepay debt and fund our best growth prospects.

I'll turn to slide 4, to begin with safety. Safety performance is the best way to gauge the health of a business. A strong safety culture goes hand-in-hand with efficient operations and an engaged workforce. We reduced total injury rates by 9% compared to the prior-year quarter, and two of our operations, Akyem and Waihi, have worked without a reportable injury so far this year.

We also had the lowest total injury rates among ICMM member companies in 2014. While these statistics show that we are heading in the right direction, we're not where we need to be.

In January, a contractor named Brian Holmes suffered a fatal injury during a shaft maintenance work at Leeville in Nevada. Our thoughts are with Brian's family and his colleagues. We will continue to work on our performance until we can send everyone home safely every day.

Let's turn to slide 5 for Quarter one highlights. Our strategy has proven successful and we're continue to follow through on our commitments. The first part of our strategy is to improve the underlying business. We lowered gold all-in sustaining costs for the third quarter running and by 18% compared to the prior-year quarter.

This was the result of sustained cost improvements and higher grades, favorable oil price and exchange rates, and some delayed capital that we'll spend later this year. We also kept gold production steady quarter-on-quarter, offsetting divestments.

The second part of our strategy is to build a stronger portfolio. We reached commercial production at Correnso in January, on time and on budget; and we remain on schedule to deliver first production at our Turf Vent Shaft in late 2015, at Merian in late 2016 and at our newest project, Long Canyon in 2017.

The third part of our strategy is to create shareholder value. We generated $815 million in adjusted EBITDA, a 65% increase compared to the first quarter of 2014, and prepaid $200 million in debt. We ended the quarter with nearly $2.6 billion in cash on our balance sheet and a net debt that is $1.4 billion lower than a year ago.

Turning to slide 6. We produced more than 1.2 million ounces of gold and 37,000 tons of copper in the first quarter of 2015. As I mentioned, this more than offset the impact of divesting Midas, Jundee and La Herradura.

Performance was strong across the portfolio. Batu Hijau ended the quarter ahead of schedule, as we mined higher grade phase 6 ore. Twin Creeks' production was favorable due to higher autoclave recovery. I'll also note that, consistent with prior years, Mill 6 at Carlin will be down in the second quarter for planned maintenance.

Akyem and Ahafo exceeded targets, despite periodic shutdowns due to power availability, which I will cover in a moment. Boddington also made up for power interruptions resulting from wildfires in Western Australia. Finally, Waihi benefited from higher mill throughput and new production at Correnso.

Our cost performance was also strong, turning to slide 7. We reduced gold all-in sustaining costs to $849 per ounce and kept them below $1,000 at every one of our managed operations.

I'll turn to slide 8 to walk through the contributing factors. Our gold all-in sustaining costs improved by $185 per ounce from the prior-year quarter. As you can see, about half of this improvement stemmed from CAS reductions driven by better grades and recoveries, as well as sustained costs and efficiency improvements.

For example, at Batu Hijau we reached high grade phase 6 ore. At Twin Creeks, we had improved grades, throughput and recoveries. At Yanacoccha, higher grades and recoveries offset lower throughput. And at Tanami, improved mining rates led to higher throughput.

Lower oil prices and a favorable Australian dollar exchange rate accounted for another 30% of our AISC improvements. Finally, 15% resulted from lower sustaining capital in advanced projects spend, primarily due to timing.

Turning to slide 9. Before I hand it over to Laurie for financial results, I'll cover a few key opportunities and challenges. Later in the presentation, I'll discuss Long Canyon, where we're taking advantage of 50 years of operating in Nevada, and the expertise, infrastructure and relationships that we've developed along the way, to maximize value.

Moving south to Merian, I'm pleased to report that construction is progressing on time and on budget. We have a good partner in the Surinamese government, who is current on all cash calls, and a highly energized team, who has begun preproduction mining.

In Indonesia, we received a new export permit and are having regular meetings with the new administration on the contracted work. Our teams in both Indonesia and Ghana are working to negotiate new labor contracts that continue to offer fair wages and benefits, while supporting our ability to thrive and grow. Negotiations have been more challenging in Ghana, but the National Labor Council has stepped into the process and we hope to reach an equitable agreement soon.

The other challenge we face in Ghana has to do with power. Drought conditions, fuel supply shortages, and diminished plant capacity are impacting Ghana's ability to generate power.

In January, the government imposed a 33% load shedding requirement on all-industrial customers. We are in discussions with the government and other producers to explore power conservation alternatives to minimize disruptions.

We have also implemented contingency plans to add temporary power generation capacity by July and permanent capacity by year-end. As I mentioned, Ahafo and Akyem are meeting production and cost targets this year.

With that, I'll turn it over to Laurie.

Thanks, Gary, and thanks, everyone, for joining us today. It was a strong first quarter for Newmont and I'm pleased with our performance.

First turning to slide 11, as Gary mentioned, we continue to see strong cost performance across the portfolio. Our first quarter cost applicable to sales per ounce and all-in sustaining costs per ounce were both nearly 20% favorable to the prior year.

These improvements drove free cash flow expansion, as seen on slide 12. We delivered $344 million in consolidated free cash flow in the first quarter and generated a $445 million improvement in cash from continuing operations compared to the year-ago quarter, as cost savings more than offset the 7% drop in the gold price. Also included in our free cash flow was a tax refund of about $100 million received during the quarter.

We reported adjusted net income of $229 million in the quarter, or $0.46 per share, compared to $121 million, or $0.24 per share last year. Adjusted EBITDA was up 65% from the prior year quarter, benefiting from lower costs applicable to sales due to lower direct operating costs, lower fuel prices, a favorable Australian dollar-US dollar exchange rate, and lower exploration, advanced projects and other expenses. We continue to fund dividends from free cash flow; and earlier this week, our Board approved a quarterly dividend of $0.025 per share, in line with our gold-linked dividend policy.

Turning to slide 13, we'll walk through the Q1 net income adjustments. The largest adjustments to our GAAP net income during the first quarter included a $0.06 per share gain related to asset sales, $0.07 per share related primarily to impairments of our marketable securities, and a $0.09 per share adjustment related to tax valuation allowances stemming from foreign tax credits. After reconciling for these items, we reported adjusted net income of $229 million, or $0.46 per share, for the most recent quarter.

And now turning to slide 14, in today's metal price environment, we continue to enhance our financial flexibility. At the end of the first quarter, our investment-grade balance sheet had approximately $2.6 billion in cash and equivalents, a $3 billion revolver, and roughly $200 million in marketable securities. On a consolidated basis, that's nearly $6 billion of liquidity.

During the quarter, we elected to prepay $200 million towards our existing term loan that matures in 2019. With this most recent prepayment, we have delevered our balance sheet by roughly $300 million since last November.

Slide 15 illustrates our scheduled debt maturities. As you can see, we do not have any significant debt due until 2019. We maintain an investment-grade rating and metrics, and our net debt at quarter-end was approximately $3.9 billion, an improvement of $1.4 billion compared to the prior year.

During the first quarter, we also extended our revolver. It now runs through 2020, giving us significant flexibility. Our revolver has a single financial covenant, maximum net debt to book capital of 62.5%, and we stood at 22.7% as of March 31.

We will continue to analyze opportunities to pay our liabilities in advance. We are on track to pay down $750 million of debt by year-end. As always, any payment of debt will be analyzed in the context of our cash position, operating performance and business environment.

Now turning to slide 16, our work to delever the balance sheet and improve our underlying business separates Newmont from the competition. As this slide indicates, our net debt to EBITDA has improved steadily over the last year and outperformed our competitors. Looking forward, we expect this ratio to improve even further.

To summarize, we are comfortable with the relative level of our debt and our maturity profile, but we continue to look at ways to reduce the absolute debt level and safeguard the long-term viability of the business.

And now I'll turn the call back over to Gary.

Thanks, Laurie. I'll shift gears now to cover outlook. Turning to slide 18. We are maintaining our long-term guidance, which calls for gold production to increase from between 4.6 million ounces and 4.9 million ounces in 2015 to between 4.7 million ounces and 5.1 million ounces by 2017. In North America, we expect gold production to increase over the three-year period, as we complete the Turf Vent Shaft and enter a period of lower stripping at Carlin. Long Canyon phase 1 represents additional upside in 2017 that is not included in this guidance.

We're managing our Australia, New Zealand and Indonesian assets as a single Asia-Pacific region in 2015. At Batu Hijau, we forecast steady gold and copper production increases through higher grade phase 6 ore and higher gold grades and productivity at Tanami. In Africa, we expect production to decline, primarily due to lower grade ore at Ahafo, and we are assessing an Ahafo mill expansion to help offset that trend.

In South America, production is forecast to decline in 2015 and 2016, before rising in 2017, as new production at Merian offsets the impact of maturing operations at Yanacoccha. We're also working on an integrated approach to developing oxide and sulfide deposits that could extend profitable production at Yanacoccha.

Our guidance also calls for continuous cost improvements. Turning to slide 19. We remain on track to meet our near-term outlook for gold and copper costs and to keep gold all-in sustaining costs below $1,000 per ounce at our managed operations. Our global outlook remains the same, but we've made some changes at the regional level.

Specifically, we are lowering our 2015 outlook for the Asia-Pacific region by about 3%, in keeping with favorable oil prices and exchange rates. This is offset by a slight cost increase in Africa, as we address the power shortages.

Our costs could further benefit from favorable energy prices and foreign exchange rates. Our current outlook assumes the Australian dollar at $0.85 to the US dollar and oil at $75 per barrel.

Every $10 reduction in oil price implies a $30 million improvement in annual attributable free cash flow. Similarly, every $0.05 favorable change in the Australian dollar exchange rate results in a $60 million improvement in annual attributable free cash flow. These estimates exclude current hedge programs.

Taking a thoughtful approach to managing sustaining capital, turning to slide 20. We're maintaining our long-term outlook for sustaining capital costs of between $850 million and $950 million per year. Our updated 2015 outlook now includes increases to develop Long Canyon and to secure additional power generation in Ghana.

We expect to spend about half of our Long Canyon capital, estimated at between $250 million and $300 million, in 2015 and most of the remainder in 2016. We'll keep you posted on any other changes as we reach decisions on other new projects.

Turning to slide 21. We create value by discovering, developing and operating profitable gold mines. And we've improved our ability to do that by optimizing our project pipeline and bringing our best projects forward in a measured and sequenced way. I'll highlight a few of our projects.

We are completing the liner for the Turf Vent Shaft and have begun to install surface facilities. This keeps us on track to reach commercial production later this year.

We are progressing construction of Merian on time and on budget. Detailed engineering is about 75% complete, and our project workforce numbers nearly 1,200 people. We expect to produce between 400,000 ounces and 500,000 ounces of gold at all-in sustaining costs of between $650 and $750 per ounce for the first five years, beginning in late 2016.

In Australia, we expect to reach an investment decision on our Tanami expansion project later this year. The project involves building a second decline in the underground mine and incremental capacity in the plant to increase profitable production and extend mine life.

The Tanami expansion could add incremental gold production of 100,000 ounces to 125,000 ounces per year at lower overall costs for the first five years. If approved, we would expect to realize full production and cost improvements in 2017.

In Ghana, we're evaluating an expansion of our existing Ahafo mill to offset the impact of lower grade ore. We expect to reach a decision later this year and see the potential to add 100,000 ounces to 125,000 ounces of production at competitive costs in 2017.

Our newest project to meet our investment criteria is Long Canyon, turning to slide 22. Long Canyon represents a new and highly prospective oxide gold district in Nevada. We are approaching development as an extension of our existing operations.

Taking a phased approach to developing Long Canyon gave us the means to lower developing capital to between $250 million and $350 million, which generates an internal rate of return of about 17% at current gold prices. Project highlights include gold reserves of 1.2 million ounces at an average grade of 2.29 grams per ton, this grade compares favorably to the average of 0.7 grams per ton for similar projects in North America; annual gold production of between 100,000 ounces and 150,000 ounces over an eight-year mine life beginning in early 2017; and costs applicable to sales of between $400 and $500 per ounce and all-in sustaining costs of between $500 and $600 per ounce over the life of mine, which is in the lowest cost quartile for gold production.

Looking further up the pipeline at our exploration prospects on slide 23, exploration is a core competency and forms a critical part of our strategy to lead the gold sector in value creation. Our program focuses on increasing our existing resource base while maintaining the ability to pursue significant new discoveries.

Long Canyon is a great example. We currently have four drill rigs operating on-site, two for infill drilling and two for exploration, to assess our best mining and processing options and inform our approach to the next phase of development.

To date, only oxide mineralization has been identified over a 3-mile strike length that remains open in all directions. Oxide ores are, of course, synonymous with lower processing costs. It will be another 3 to 5 years before we're ready to make a funding decision on this next phase and we'll keep you posted on our progress.

Other exploration projects that hold the potential to add production in the medium horizon include; the Subika underground in Ghana, which would give us access to ore grades that are significantly higher than the surface; PIP, Northwest Exodus in Nevada, an extension of the Exodus underground mine which would add profitable production; and [Catcher Main], which is part of the oxide expansion effort at Yanacocha.

I'll wrap up our comments with a look at where we are taking Newmont into the future, turning to slide 24. We're off to a strong start in 2015; and with every quarter, we are moving closer to our goal to lead the gold sector in value creation. Looking forward, we will continue to execute our strategy to improve our underlying business by continuously raising our safety, cost and technical performance; to strengthen our portfolio by building a longer life, lower-cost asset base; and to create shareholder value by generating cash and continuing to strengthen our investment grade balance sheet.

Thank you for your time. I'll now open the floor to questions.

(Operator Instructions)

Andrew Quail, Goldman Sachs.

Good morning, Gary, Laurie and team. Congratulations on a very, very strong quarter. A couple of questions from me. First, at Batu, excellent quarter. Obviously, we're going through the phase 6 ore, as you suggested, Gary. When we look at throughput and grade, is this like the benchmark this quarter, or do you expect further improvements from here going forward into 2015?

At this point, I would expect us to see some improvement later in the year, most likely in the third quarter, Andrew. But we're really, as you saw in the first quarter, we just got into it. It will pick up in the third quarter and then be steady going forward.

Great. And one on Merian. Obviously, you received some money from the Suriname government. When do you expect to receive the balance of that?

We received all of the monies for the initial acquisition of their 25% interest at basically the end of last year. And we make cash calls on a regular basis, and that continues. Basically, based on what our spend is each month, they make their proportion of the cash calls along the way. So basically, they are right up to speed as we go forward.

Great. And maybe last one, more on strategies, with Turquoise Ridge, you guys obviously earn 24%. What do you see for Newmont going forward? Do you guys have a strategy to maximize that investment?

From our standpoint, we'll continue to work with our joint venture partner to see how we can best achieve the best value overall for the parties out of that investment. We currently have an agreement to process the ore from that mine at our Twin Creeks facility, and we're looking at how we can make sure that we get the best mix going forward between both operations and value for both parties.

(Operator Instructions)

John Bridges, JPMorgan.

Congratulations, Gary, Laurie, on the results. Just to dig a bit deeper into Batu Hijau. The last time you were in the good stuff there, you had issues with access because of rain, the pooling at the bottom of the pit. How can we model access to this high-grade material over the next two, three years? Are there going to be periods in the monsoon when you're not going to be able to access that and you're going to use stockpile material?

As we put together our plans here, as we're into the higher grade material over the next three years, we've taken into account periods when we may not have access. And I say may, because, for instance, this year we're about 150 feet lower in terms of the water level than what we expected, because we had lower rainfall and we've installed some additional pumping capacities to help us along the way. So next year we would have a period -- and as we get into next year's guidance, we'd give more detail as to when specifically you could expect it, but we have a bit of a period in 2016 and then a little bit in 2017, just really building in, based on normal rainfall, when we'd expect to be working in higher areas of the pit.

So we can expect this sort of grade or better each quarter of this year?

This year, we're basically through the rainy season that starts later this year, and we're in good shape for this year.

Okay. Well done. Yanacoccha, you mentioned initiatives down there. Could you elaborate a little bit on that? Thank you.

Sure. We're looking -- I guess the word would be holistically -- at a number of different projects that include potentially the bio leach, where we continue to go through testing for at least another year or so to confirm the economics and the value of that portion. The other elements are how we can carry forward primarily the Verde deposit, but there's other deposits there that contain gold and copper, and either producing a copper/gold concentrate and selling that or potentially further processing that on site, whether it's through an autoclave or some other concentrate leach process. We're looking at basically all these options to extend both oxide and sulfide life at Yanacoccha, and look to be in a position, I'd say later next year, to make a decision on which path or paths make the most sense to develop.

There seems to have been better performance from some of these leach processes down at sea level, compared to high-altitude. Have you tried out some of these things at lower altitude?

That's one of the things we're taking into account as we look at it, whether we'd want to locate those facilities somewhere else or do it at altitude.

Okay. Good luck with that. And congratulations again. Thanks Gary, Laurie.

Great. Thank you, John.

Brian MacArthur, UBS.

I just want to go back to Batu Hijau 2. Given the timing of shift of Freeport's ramping up at Grasberg, and now you're obviously in the high grade how it works out over the next three years. Do you see any challenge about being able to place that concentrate from Batu Hijau? Because obviously, they were pushed back from originally peaking in 2016 and 2017. I want to make sure you don't see any problem placing all that concentrate, so then it gets taxed at a higher rate outside, if it's not going to Gresik.

It's actually a smaller percentage, Brian, of our concentrate that does go through Gresik. We try to put as much as we can, but the rest goes to export. And with that, we have no problem placing that concentrate. I think working through, we've got the extension on our export permit which allows us to continue to export through the -- basically towards the end of September. And we are working actively now with the government to pin down the changes on the contract to work, get those agreed, so that we can get into a process and a bit more certainty in terms of what goes on when each of these 6-month extensions come up.

And the cost of the export duty is built into the guidance that we've given, as well.

Okay. That was going to be my next question. Roughly, how much goes to Gresik? Because obviously, it makes a huge difference going forward as we get into this high-grade. Is it like 10% or 20% of it that goes there roughly, just for my modeling purposes?

I'm going to have to follow up to give you an accurate answer on that one. I just don't recall. It's been a little higher this year than what we anticipated, for reasons you've seen in terms of others supplying to Gresik. And we've helped to fill in the slack.

Right. Okay. But if that happens, that's option value upside, right? Because it goes through and you don't have to pay the export tax?

That's correct.

On Turquoise Ridge, can I confirm -- and I can't remember, I should know -- but your deal to process Turquoise Ridge at Twin Creeks, is that -- for the current size mine, that is to say, if that were expanded substantially, do you still have that right? It all has to be worked through there, or how does that actually work?

Basically, we've got an agreement that runs through 2018 to process the ore. And we're working with them in terms of how, as we're looking at potential expansions at Turquoise Ridge to increase the throughput, how we would process it. But we clearly have the processing capacity at Twin Creeks to be able to handle some additions.

Brian Yu, Citi.

The question is on Ghana and then the permanent power that you're going to install there. Once it's fully running, how much of the power are you going to source captively versus from the grid, and is there going to be a meaningful change in your power cost?

I'm going to have Chris Robison, our Chief Operating Officer, cover off some of the details around the power capacity.

Right now, the plan, as Gary mentioned earlier, is by mid-year we will have temporary power in place which will provide -- which will fill this gap for the 33% load shedding. And then by year-end, we'll have permanent capabilities in place to offset the 33%. Obviously, if power generation in country increases or starts returning to normal levels, then we would back off on our generation. Actual cost impact is about $10 million to $11 million a year in additional costs with our own generation.

So you're going to have the spare capacity in case you still get this 33% load. But it is higher cost, so if they allow you to pull more from the grid, you will do that and just --

Absolutely. Yes.

How should we think about this load shedding? Do you see this as a one-off type event, or is it going to impact your decision somehow with the Ahafo mill expansion?

It's a good question, Brian. As we look at both the Ahafo mill expansion and the Subika underground, we've got to assess the power availability question. It's an issue that needs a longer-term solution. We are working with the government and we're looking at different options. Because ultimately, it needs more reliable capacity. Clearly, it's the drought that's affected some of the availability. So getting back to normal conditions will help there, but that won't happen in a period of months. That could take through next year to see that sort of a change. We will take that into account as we look at the economics of these expansions, and that will be an element that we'll have to make sure we address as we bring those forward for approval.

Tanya Jakusconek, Scotiabank.

Good morning, everyone, and congratulations on a good quarter. Just wanted to come back to two operations, Yanacoccha and Ahafo. Maybe, Gary, can you talk a little bit about what you see happening at Yanacoccha in the next couple of years? I think you mentioned that you definitely see production declining. And if we don't go ahead with some of those options that you talked about, when do we start getting into the stockpile? That's my first question.

Okay. Yanacoccha -- and thanks, Tanya, for the question -- right now, under current production, this is the last peak year in the roughly million ounce per year. Next year, it's not quite half. It's about 600,000 consolidated ounces. We maintain that for the next 2 to 3 years after. And then 2019, we're down into basically going through the leach pads and what's remaining, if we were to do nothing else. So that's the current, basically, base case scenario.

Okay. And then, I guess, Quilish, we just seem to forget about that for now?

Quilish is still the resource that's there. But as we continue to do with Conga and continue to work in that whole region to improve our social acceptance, that's clearly one that didn't have the social acceptance, and we took a step back there and would require those changes, as well, before we'd consider it.

Okay. And maybe moving just to Ahafo. You had a very strong Q1. And even if you look at the upper end of your guidance for operations, you're really looking at production falling to maybe 77,000 ounces a quarter. Is this all going to be grade related, or is there something else in the mine plan? Maybe you're just being conservative. I don't know. Maybe just talk about how you see the operation through the year.

Basically -- and I can have Chris chime in here, as well -- but we do see the grades declining through the course of the year. And so that's what we've laid out in terms of our guidance at this stage. And that's why we're looking at these expansion projects of the Ahafo mill and the Subika underground, to be able to offset the lower grade going forward. Chris says I've got it covered.

I just wanted to make sure that the grade decline started in Q2. Or do you see yourself staying a little bit and then tapering off towards the end of the year? I don't know.

I think specifics, we are starting to get into some of that lower grade. I think the other piece is whether anything changes around the power situation. Right now, we're still running the basically six days on, two days off sort of a process, and working through that.

Okay. And then just my last question is really on M&A. I think we went through your balance sheets getting stronger and stronger. You've got a lot of liquidity available. Maybe you could touch a little bit on your M&A strategy. You have a lot of internal growth that you can push forward. But how do you balance that versus the externally?

Clearly, we've got, as you acknowledged, a very good internal pipeline. We've got the best understanding of those deposits and their potential, and we're able to time how we bring those forward in an effective way. You've seen how we've handled the cash, by paying down debt, and also looking to carry forward our best projects.

M&A and how it fits? We kick the tires on things and look them over. And if we see an opportunity that would add value to our shareholders, we will pursue that.

Is the focus more on early stage development, or are you looking at producing assets?

At this stage, I'd really tend to focus more on producing or close to producing types of assets.

Okay.

And I should say gold assets, just to reaffirm that.

Thank you. Just needed to make sure it was gold and our copper focus. Or gold/copper, would that still be a focus?

Gold primarily. Copper/gold or gold/copper would still fit within there.

Okay. And maybe the potential to pay down $750 million in additional debt this year. What minimum cash balance would you keep on the balance sheet for you to be able to do that?

I'm going to have Laurie pick that one up.

I think clearly, we would get down below $2 billion, maybe $1.5 billion to $2 billion, we would try to keep on the balance sheet to make sure that we have coverage and we aren't bringing things back that we don't need to.

Okay. So if we were to just think about it conceptually, whatever the gold price will be, if there aren't any opportunities for M&A or other investment, we could just keep paying off that 219 debt, but keep a cash balance of $1.5 billion to $2 billion? Would that be fair?

Yes, that would be fair. And we will also be paying down, we have some project level debt in Indonesia, and that's also targeted for this year. We would hope to pay some of that down, as well. And as Gary mentioned, with certain projects in places like Peru and Ghana, we'd probably rather leave the cash there and redeploy it on projects, if we see that in the near-term basis, rather than bringing it back and paying down debt.

Okay. But of the $750 million potential repayment, would the majority of that be the what was due in 2019?

Most of it will be the term loan, yes.

Okay. Perfect. Well, thank you very much and congratulations.

Thanks, Tanya.

Jorge Beristain, Deutsche Bank.

Good morning, Gary and everybody. And, again, congratulations on the strong results. And I think we're really seeing a differentiated performance in your stock vis-a-vis your peers in the last two years, which reflects that. My question is really on the guidance. It seems that your cash cost guidance is still maintained in the $660 million to $710 million range for full-year 2015. You printed $609 million in Q1. Obviously, there's some grade issues going forward. But it seems you're being fairly conservative there. So could you talk around those numbers and why we are seeing such a implied steep ramp in the rest of the year, or is it simply conservatism?

Thanks, first of all, for your comments, Jorge. Very much appreciate the recognition. On guidance, what we've done, we stuck basically with where we were in the original guidance for the year here at Q1, and have given -- you see the portion of that that comes from the oil and FX, so you can make those adjustments. I wanted to emphasize that we will be making the spend on the capital, so people don't start modeling a lower amount there.

I think in terms of the overall performance, what we'll do at the mid-year is take a step back and just make sure it's fully reflective of what we've experienced through the first half of the year. So we just figured rather than trying to make a big adjustment on the cost numbers, we're comfortable with where production is coming in, let's adjust that. We've made the little tweaks in Africa to account for the power and the tweaks in Australia for what we've seen on the changes in oil and exchange rate. But we'd look, as we give the second quarter results, to update the rest of our guidance.

As Gary pointed out, the oil and FX that we experienced year-to-date, we haven't brought those down to the level that we've seen year-to-date. So that's definitely something that you could model into your numbers and get to a lower number than what we are currently sitting at.

But that does seem to be roughly $100 million-ish, if one was to mark to market on an annualized EBITDA basis. So didn't seem that material, but worth flagging.

My other question was also just on the moving forward in Indonesia, and we heard some comments from Freeport yesterday on their call that the amount of equity investment in a smelter would be really pared back and also very much back-end loaded to the second half of this decade. Could you comment as to where you stand, now having had your export license renewed, in terms of actually being an equity investor in a potential smelter out there? Because it does seem to be a fairly de minimus amount of potential equity, and if you are involved in talks with Freeport to contribute capital. They've mentioned many partners are talking with them, and if you could just comment on that.

We would probably be considered one of those many partners with a different view, because we bring concentrate into the mix. Our position has been, we don't stand in a good position to build a smelter. We support the country's policy on in-country smelting. We'll work with Freeport or others, because we're talking with a few other parties that are looking to build a smelter.

When you look at our production profile, you see over the next three years is a peak and then we go through a low range before we would get into phase 7 out in the 2022, 2023 time frame. And that's when having a smelter would be of more impact to us as we go through the phase 7 ore. So we'll continue to keep people updated as we work through those various discussions and also work through with the government.

I should comment, I was out in Indonesia last month and had a number of meetings with different government officials. And I was pleased for meeting with government officials in any country, when you have meetings that start on time. And I think what I heard there and what I saw demonstrated in the extension of our export permit what people say they do commit to. And it's good to see. They'd like to see things wrapped up on this soon. So would we. But there's complexities to work through that we've got to get completed.

Great. Thank you.

Thank you, Jorge.

(Operator Instructions)

And at this time, there are no further questions. I would like to turn the call over back to your host. You may proceed.

Thank you. Thanks again for joining our first-quarter earnings call. Our team continues to drive stronger performance across the portfolio, sustaining the cost improvements we've achieved over the last year, progressing new ways to work more efficiently, and generating nearly $400 million in free cash flows. This performance has given us the financial flexibility we need to pay down debt, expand our existing operations, open prospective new districts, and create value for our shareholders. With that, I'll close the call and wish everyone a good weekend. Thank you.

And that concludes today's conference. Thank you all for participating. You may now disconnect.