Barrick Mining Corporation (B) Q3 2011 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Barrick Gold Q3 2011 Results Conference Call. [Operator Instructions] I would like to remind you, today's call is being recorded, Thursday, October 27, 2011. And now I have the pleasure to turn the call over to Mr. Deni Nicoski, Vice President, Investor Relation at Barrick Gold. Please go ahead, sir.

Thank you, operator, and good morning, everyone. Before we begin, I'll bring to your attention the fact that we will be making forward-looking statements during the course of this presentation. For a complete discussion of the risks, uncertainties and factors which may lead to our actual financial results and performance being different from the estimates contained in our forward-looking statement, please refer to our yearend report or our most recent AIF filing. With that, I'll hand it over to Aaron Regent, President and CEO of Barrick.

Thanks, Deni, and good morning. And thank you for joining our conference call today. I'm joined here today by Jamie Sokalsky, Peter Kinver, Kelvin Dushnisky and Rob Krcmarov. There are also other members of our senior management team on hand as well, who will be available to answer questions later on the call. I'll start by covering some of the highlights of the quarter and provide an update on our projects. I'll then turn the call over to Rob Krcmarov, our Senior Vice President of Global Exploration, to give you an update on the recently announced Red Hill and Gold Rush discoveries and other high-priority programs. Jamie will take you through our results in a bit more detail and our outlook on the gold market, after which we'd be happy to take any questions that you might have. Overall, we are pleased with the results in the quarter. Operationally, we met our production and cost targets. Quarter 3 gold production was 1.93 million ounces at total cash cost of $453 per ounce. EBITDA's on track to meet our original guidance for 2011. We reported a 45% increase in net earnings to a record $1.37 billion, or $1.37 per share. Adjusted net earnings were up 52% to $1.39 billion, or $1.39 per share. This equates to an annualized 25% return on equity, up from 21% in the second quarter. And our operating cash flow increased by 35% to a record $1.9 billion. Our cash margins continue to expand, reflecting our leverage to the gold price. Cash margins increased by 55% to nearly $1,300 per ounce, and net cash margins were up 51% to over $1,400 per ounce. Our projects in construction remain on track, with production at Pueblo Viejo and Pascua-Lama anticipated in mid-2012 and mid-2013, respectively. In September, we announced 2 new world-class gold discoveries, Red Hill and Gold Rush, which are close to our Cortez mine in Nevada, and we expect to significantly expand the initial 3.5 million ounce inferred resource. Rob will update you on this in a moment. With the growth in our earnings base and a positive outlook on the gold price, the Barrick Board approved a 25% increase to our quarterly dividend to $0.15 per share. This continues our track record of paying a progressive dividend, which has now increased by over 170% the last 5 years. Turning to our operating results. The North American region continued to perform well in the third quarter, producing 836,000 ounces at total cash cost of $415 per ounce. The Cortez mine was on plan, producing 353,000 ounces at a total cash cost of $230 per ounce. The Cortez Hills open pit continues to be in a higher waste-stripping phase, which is expected to result in lower production in the fourth quarter before returning to a higher grade area for the pit in the first quarter of 2012. The Goldstrike operation, where the open pit is also in a higher stripping phase, produced 257,000 ounces at a total cash cost of $516 per ounce. Our South American business unit performed ahead of plan, producing 475,000 ounces at a cash cost of $358 per ounce. The Lagunas Norte mine was ahead of plan, producing 219,000 ounces at cash cost of $260 per ounce. Veladero contributed 220,000 ounces at a cash cost of $300 -- $380 per ounce. Australia Pacific produced 472,000 ounces at a cash cost of $690 announced in the third quarter, and attributable production from African Barrick Gold was 135,000 ounces at a cash cost of $687 per ounce. Copper production from Zaldivar was 65 million pounds at a cash cost of $1.67 per pound, and we continue to expect full year copper production from South America to be around 300 million pounds at a cost of around $1.40 to $1.50 per pound. In the third quarter, production at Lumwana was 75 million pounds at a cost of $213 per pound, and it included a full quarter of production. For the year, we now expect Lumwana to produce about 155 million pounds of copper at total cash cost of between $1.95 and $2.10 per pound. Areas of continued operational focus at Lumwana include mill debottlenecking, pit re-optimization, mine sequencing changes, dilution control, equipment availability and leveraging supply chain agreements. An infill drill program underway at Malundwe to improve dilution control is ongoing. In addition, we are advancing an expansion study that could potentially double throughput rates. I just want to comment on the political environment in Zambia, just a brief comment. After the recent election in Zambia, the new administration led by President Sata have indicated that it will be reviewing the tax regime of the mining industry. We have met with the government and have had a constructive dialogue, and are optimistic that there will be a resolution that will meet the needs of the government and is acceptable to industry. So in summary, quarter 3 gold production and costs were on plan, and we expect to meet our guidance for the year of 7.6 million to 7.8 million ounces of gold at a total cost of around $460 to $475 per ounce. Also, copper guidance for the year is expected to be around 450 million to 460 million pounds, slightly lower than our most recent guidance, primarily due to expected production from Lumwana as a result of mill maintenance, which was moved into the fourth quarter from 2012. Total cash cost of $1.60 to $1.70 per pound is within our most recent guidance range. Turning to our projects. At the Pueblo Viejo project in the Dominican Republic, overall construction is now more than 75% complete, and first production continues to be expected in the middle of next year. Our share of annual production will be around 625,000 to 675,000 ounces at a cost of between $275 and $300 per ounce. As we reported in the second quarter, a major rainfall event in May damaged the partially constructed tailings dam facility. Remediation work is progressing well, and we are now -- we received of all permits required to construct the main dam to its full height. Total mine construction capital is estimated to be $3.6 billion to $3.8 billion, which is unchanged from what we announced last quarter. Our share of that is $2.2 billion to $2.3 billion. And at the end of the quarter, about 80% of this amount has been committed. All 4 autoclaves have now been brick-lined, and nearly all of the required concrete has been poured. Approximately 95% of the steel has been erected, and more than 7.6 million tons of ore had been stockpiled. Work continues towards achieving key milestones, including the connection of power to the site, and we continue to advance our plan to build a power plant and transmission line to provide a lower-cost long-term power solution for the mine. At Pascua-Lama, initial production continues to be anticipated in the mid-2013, and the project is expected to contribute to Barrick production of around 800,000 to 850,000 ounces in the first full 5 years at an operating cost which is a negative $225 to $275 per ounce, and that assumes a $25 silver price. Annual silver production for the first full 5 years is expected to be 35 million ounces, and for every $1 per ounce increase from the silver price, total cash costs are expected to decrease by about $35 per ounce. Pre-production capital is estimated to be $4.7 billion to $5 billion, in which about 50% have been committed at the end of the third quarter. At the end of the third quarter, earthworks on the Chilean side were more than 80% complete. In Argentina, earthworks are about 60% complete. Civil concrete works have commenced on the Merrill Crowe process plant and continue on structures for the stockpile, granite and pebble crushing areas. Occupancy and expansion of the construction camps in Chile and Argentina continues to ramp up. The Los Amarillos camp in Argentina, which will have approximately 5,500 beds once completed. It currently houses about 2,600 people out of the target 3,500 beds by year end. At the Barriales camp in Chile, the former exploration camp has been demolished and construction is nearing completion on various facilities. Now yesterday, a new presidential decree was issued to require that all export revenues from oil and gas and mining be converted from U.S. dollars into pesos, back into U.S. dollars before it can be taken out of the country. A transaction fee of 1.2% would apply. We have had initial discussions with the Secretary of Mines and other government officials to understand the implications for our operations and the objectives of the government. Our initial assessment is that we can work within the system. In any event, we have stability agreements at both Pascua-Lama and Veladero which would apply. Both Pascua-Lama and Pueblo Viejo generate a higher return on investment, particularly at today's gold and silver prices. At $1,600 per ounce gold, Pueblo Viejo is expected to contribute approximately $900 million of average annual EBITDA to Barrick over the first full 5 years. And this represents an investment-to-EBITDA ratio of around 2.5x. So with this construction decision in February 2008, Barrick's share of average EBITDA based on prevailing gold prices at that time has increased by 125% from the $400 million previous estimate. And at Pascua-Lama, due to the $1,600 gold and $30 silver, the project is expected to generate approximately $1.7 billion of average annual EBITDA. This represents an investment-to-EBITDA ratio of 2.9x. And similarly, this is up significantly from the estimates that were used at the time of the investment decision. The next slide further underscores the high quality of our projects. Our total cash cost forecast for this year for Barrick overall is around $460 to $475 per ounce, which puts us at the low end of the second quartile of the industry cost curve, I think, positions us quite well compared to our peers. But the mines in our pipeline are world-class deposit, they are big, long lived and low cost, and you'll see that PV, Cerro Casale are first quartile mines. Pascua-Lama is probably one of, if not close to, the lowest cost mine in the world. In addition to these projects, we have another 9 projects in our pipeline, which provide us with considerable development options for the future. Jabal Sayid is going to be producing next year, it's more than 60% complete. Cerro Casale at Chile is in permitting. Turquoise Ridge in Nevada is in pre-feasibility. Donlin Gold in Alaska is nearing completion of the updated feasibility study, which includes a natural gas pipeline. Deep sulfides in Lagunas Norte in Peru are ongoing a scoping study, and we are advancing the expansion study at Lumwana, which could potentially double processing rates. The pre-feasibility study is underway on the Zaldivar sulfides. A draft feasible study for Kabanga has been reviewed by ourselves and Xtrata. And at Reko Diq in Pakistan, we are awaiting resolution of our mining lease application. That's a quick review of our projects. Now at this point, I'd like to turn the call over to Rob Krcmarov, to discuss and update you on our exploration programs. Rob?

Thanks, Aaron. The 2011 exploration guidance is $370 million to $390 million and includes global exploration, what we call MinEx, or very near mine exploration; and African Barrick Gold exploration. We're on track to meet our targeted resource additions this year, and we're also setting up other projects for resource additions in future years. Exploration programs are underway in all regions. Red Hill, Gold Rush, Turquoise Ridge and Lumwana are key focus projects for us, which I'll be discussing in this presentation. The highlight of the exploration report this quarter was the announcement of the Red Hill and Gold Rush discoveries on September 7, which we followed up with a site visit to Cortez around 2 weeks later. Since we reported to you at our Investor Day, not only have we extended the strike length of Red Hill, but we intersected grades high enough to support underground mining, and the system still remains open in both directions. Drilling between the 2 deposits continues to intersect mineralization, and it's looking increasingly likely that the 2 deposits will emerge. We're now drilling south of Gold Rush to see how far that deposit extends to the south, so let's now have a look at some details. The drill results shown here on this slide since our Investor Day continue to increase our confidence in the size potential and also our confidence in the continuity of mineralization. At Red Hill, recent step-out holes have extended the zone, both to the north and to the south, and so the mineralization is still open in all directions, and the resource is expected to grow considerably beyond the current 3.5 million ounce inferred resource, which is shown in the red outline on this map. A step-out hole located 1,000 feet north of the current resource model intersected 120 feet at 0.17 ounces per ton, and a step-out hole 2,000 feet north of the current resource model intersected 80 feet at 0.16 ounces per ton and 30 feet at a 0.25 ounce per ton. So I think these intersects show that the system continues well to the north and is still open and increases the confidence in the size potential of the system. And in addition, a hole drilled 2,300 feet north of the KB zone intersected 60 feet to 0.2 of an ounce and confirms the potential to develop a very significant zone of high-grade underground mineralization in addition to the open pit zone. Results for holes drilled in the what we call the 3.5 area at the southwestern extension of Red Hill have confirmed that the mineralization is continuous and open to the south and the southwest, and results include thick and high-grade intercepts of 128 feet at 0.1 -- at 0.316 ounce per ton and 172 feet at 0.2 ounces per ton. At Gold Rush, continuity continues to be confirmed by 200 to 400 feet spaced infill holes, resulting in higher confidence for adding inferred resources in the year end update. Recent results include 91 feet at 0.77 ounces per ton, 76 feet at 0.85 ounces per ton, and this -- both those intercepts are in the same hole, as well as 106 feet at 0.16 ounces per ton and 80 feet at 0.13 ounces per ton. In addition, broader step-out holes between Red Hill and Gold Rush have confirmed the continuity of the mineralized horizon between the 2 zones, and drilling has also commenced in September to test the southern extension of Gold Rush with 5 1,000 feet spaced drill holes planned, and we're currently drilling those. Moving over to Turquoise Ridge. The drill program of the Getchell open pit is successfully upgrading and adding resources from our underground and surface drill programs. The Phase I program is complete, and we're successful in upgrading the unclassified mineral inventory. And the Phase II is underway with 9 surface and underground rigs and is planned to upgrade 7.5 million ounces of inferred resources to "measured" and "indicated" to support the ongoing engineering study. The exploration drill program continues to show positive assay results. And continued success in an area to the south has successfully discovered significant new ounces, which are not in our current plan. And this could deepen the planned pit. Results include 75 feet at 0.224 ounces per ton, shown on the left-hand side of the slide. Getchell open pit drilling that we're doing from underground continues to confirm and it exceeds expectations. New zones of very high-grade mineralization continue to be found, such as 120 feet at 0.66 ounces per ton and 76 feet at 0.451 ounces per ton, shown on the right-hand side of the slide. Pre-feasibility and feasibility studies are expected to be completed in late 2012 or early 2013, and final selection of processing location or transportation methods is pending, to be followed by condemnation drilling of planned dumps, heads and other facilities. Following the Equinox acquisition, an accelerated exploration program was planned and implemented in Zambia to scope out the limits of the entire Chimiwungo and Malundwe deposits at Lumwana, both of which remain open in multiple directions and also, to deliver an increased indicated resource at Chimiwungo as a basis of an expansion study. To that end, we have reserved development, and a resource definition program is underway at Chimiwungo to expand and upgrade the resources and also a condemnation program just finishing up to help plan future infrastructure requirements. In Malundwe, a resource definition program is underway to upgrade resources. In addition, we're exploring within the Lumwana license and on regional copper and gold exploration properties within the Zambian copper belt with the objective of finding new developments. Drill programs are progressing on all targets, and the program is ramping up with 11 rigs active, 4 more currently in Zambia. They're undergoing final commissioning, and we're targeting to increase to around 20 rigs around the end of the year. In the past quarter, we've doubled the drill capacity and increased drill meterage production by 70%. In conjunction with increasing drill rig capacity and meterage, we've increased personnel and have expanded the exploration camp and office and are in progress with lead capacity and expanding the core yard facility. Chimiwungo resource development program commenced recently with 7 rigs currently active on that particular project. About 20 holes have been completed or are in progress out of a total of 850 holes in the ramped up 2011 and 2012 program. Assays are pending, but visible copper mineralization has been noted in all holes, and the thickness of the mineralization -- of the mineralized interval, rather, meets our expectations. In addition, results from sterilization are also in line with expectations, although some additional mineralization encountered in that drilling helped optimize the starter pit. And we drilled 7,400 meters at Malundwe in Q3, and results are all in line with expectations from infill drilling. I'll now turn it over to Jamie to discuss our financial results.

Thanks, Rob. As Aaron outlined earlier, our financial results for the quarter were very strong. The third quarter average realized gold price was a new record at $1,743 per ounce, which is $41 higher than the average spot price, and that's up over $500 above the third quarter of last year, or 41% from the $1,237 per ounce that we realized in the third quarter of 2010. So our trend of gold margin expansion continued during the quarter, driven both by higher gold prices but also continued cost control. Cash margins and net cash margins increased 55% and 51% to about $1,300 and $1,400 per ounce, respectively, reflecting the exceptional leverage the company has to the gold price. Our reported net earnings for the third quarter rose 45% to a record $1.37 billion, or $1.37% per share, from the $942 million, or 96% -- $0.96 per share in the prior year period. On an adjusted basis, our third quarter earnings increased 52% to $1.39 billion, or $1.39 per share, from the $912 million, or $0.93 per share, that we realized in the third quarter of 2010. And that reflected higher realized gold and copper prices and higher copper sales volumes. Our third quarter EBITDA was up 47% to $2.5 billion from the $1.7 billion in the same prior year period. I should mention that our third quarter average realized copper price was impacted by about $60 million in provisional pricing adjustments, due to the significant decrease in copper market prices at the end of September, and that reduced earnings by about $0.04 per share on an after-tax basis. The copper sales price, as with many other companies, is determined provisionally at the date of sale, with a final price determined at an agreed-upon future date, generally 1 to 4 months after the initial sale date. The prices on these sales are marked-to-market at the balance sheet date based on the forward copper price for the relevant quotational period. And all mark-to-market adjustments are recorded in copper sales revenues. So as a result, our third quarter average realized copper price of $3.54 was below the average market copper price of $4.07 per pound. And as at the quarter end, there were about 82 million pounds of copper sales, which were provisionally priced at $3.27 per pound that are expected to be settled in the next couple of months before the end of the year, with the final sales prices depending on the market copper prices in that period. Our third quarter operating cash flow of $1.89 billion compares to the $1.4 billion in the same prior year period, and adjusted operating cash flow of $1.92 billion compares to the $1.44 billion. Those are both company records and highlight our tremendous operating cash flow-generating ability and the leverage to the gold price. While we're focused on growing our production, we're also very focused importantly on growing our margins and ultimately, the bottom line on a per share basis. And you can see with this graph how higher gold prices and our cost management measures have translated into margin expansion of nearly 80% for Barrick over the past 2 years, compared to a corresponding increase in total cash cost of 16%. We've seen the same trend of margin expansion on a net cash cost basis, with net cash margins up 72% in the last 2 years versus costs up 12% over the same period. So you can see we're growing our margins substantially with the strong gold price. And we control our cost by using a variety of input cost hedging to give predictability to our earnings, and this continues to yield good results. On the currency side, about 60% of our consolidated production cost is U.S. dollar denominated. As you know, our largest single currency exposure is the Australian dollar. We're hedged on substantially all of our expected remaining Australian dollar operating and capital expenditures, the remainder of 2011 and also 2012 at effective average rates of $0.76 and $0.82, respectively, which is well below $0.20 from the current Australian dollar rate. We also have substantial coverage for the following 2 years at rates at or below $0.80. We also have mitigated the impact of higher oil prices through the use of financial contracts and our production from Barrick Energy so that a $10 change in the WTI crude oil prices is only expected to impact the next couple of years' cash cost by about $1 per ounce. The Barrick Energy contribution along with the financial contracts provides hedge protection for approximately 80% of the remaining fuel consumption for 2011, and approximately 90% of expected 2012 and 2013 fuel consumption. And we have substantial hedge coverage in the years post-2013, both through financial contracts and through Barrick Energy. These cost containment efforts along with the quality of our asset base has positioned us as one of the lowest cost senior gold producers. And we take our targeted growth and production to 9 million ounces, which brings in about 1.5 million ounces at significantly lower cash costs from both Pueblo Viejo and Pascua-Lama, plus strong gold and copper prices that should result in continued margin growth on more ounces and ultimately, greater returns to our shareholders. We have some copper collar strategies which allow us to ensure strong returns and cash flow from the copper business to reinvest in our gold business while allowing us still to participate in higher copper prices. So we have floor protection in place on substantially all of our remaining copper production for this year at an average floor price of $3.45 per pound, and have upside participation to an average of approximately $4.85 per pound. And we have also put in floor protection on just under half of our expected 2012 copper production at an average floor price of $3.75 per pound while we've sold call options at about 40% of our expected 2012 production at an average of about $5.50 per pound, with the remaining production subject to market prices. So you can see from this next chart, Barrick continues to demonstrate exceptional leverage to the gold price. Our adjusted earnings and cash flow have substantially outpaced the rise in the gold price over the past 7 years. Since 2004, gold is up about 270%, but Barrick's cash flows per share have increased by over 500%, and earnings per share are up nearly 900%. And that growth in our earnings has driven a continued improvement on our returns on equity. Based on our third quarter adjusted net earnings, our return on equity has increased to 25% on an annualized basis from the 21% we saw in the second quarter, and has grown significantly from the 7% we realized in 2007. So you can see we are generating excellent returns on our invested capital. And this also positions us quite well against our peers, which average at 13% return on equity in the second quarter. So we're almost double that. I also wanted to take a moment to provide a bit more detail on our approach to capital allocation, as this has been quite topical for gold equities in the current high gold price environment. At Barrick, we take a balanced approach to capital allocation, which allows us to continue investing in our high-return projects, as well as prudently manage our balance sheet, which has given us the highest credit rating in the gold industry, and also repay debt. That's allowed us to establish a track record of paying a progressive dividend. With our continued strong financial results, which included quarter-end cash of nearly $3 billion and a 9-month adjusted operating cash flow of about $4.3 billion, combined with our positive outlook on the gold price, we've increased the quarterly dividend by 25% to $0.15 per share. If you translate the semiannual dividend of $0.11 that we've previously paid in 2006 to a quarterly equivalent, the current $0.15 dividend represents more than 170% increase in capital return to shareholders in the last 5 years. And we're able to do this, as I said, whilst also investing in our high-quality pipeline of projects and managing our balance sheet. So you can see it's a balanced approach and one which is focused on extracting the highest rates of return for our shareholders, while also continuing to return additional capital. Turning to our 2001 outlook, we expect to be within our original gold production guidance for the year but have narrowed this range to 7.6 million to 7.8 million ounces. Total cash, we've also narrowed the range to $460 to $475 per ounce, which is also within our original guidance for the year. Net cash cost of $330 to $350 per ounce have been adjusted to reflect the lower copper price assumption of $3.25 per pound for the remaining quarter of the year, which would result in a realized price of $3.40 for the fourth quarter when we include the impact of our copper collars. For 2012, gold production is anticipated to be comparable to 2011. Total cash cost for gold next year are expected to be about 10% higher, primarily due to inflationary cost pressures throughout the industry, as well as changes in the production mix. Total cash cost for copper are also anticipated to be higher in 2012 due to similar inflationary cost pressures, and as well as the impact of a full year production from Lumwana. As I mentioned, within the next 5 years, we continue to target production to grow to 9 million ounces, with contributions from Pueblo Viejo and Pascua-Lama and other organic opportunities. With the recent decline in the gold price and the events that are happening throughout the world, I like to make just a few brief comments on our outlook for gold before I turn it back to Aaron. If you look at the factors supporting the metal, I think there continue to be many good reasons why the price continues to be strong and why it could perform even better. Clearly, when you look at the challenges facing the global economy where there is structural economic challenges or continuing euro zone sovereign debt concerns and the policy response, which we're seeing to those challenges including reflationary efforts, all of this is reinforcing gold's ability to retain its purchasing power. Events like the recent downgrade of the U.S. debt rating, the Swiss National Bank's measures to stem the Swiss franc appreciation, have also given further weight to holding hard assets over paper assets, assets which are often subject to intervention. If you look at other specific country issues like India and China where you have high inflation rates, that's also widely increasing the appeal of gold as a way to protect capital. And the increasing wealth that is being created in these emerging markets is going to increase the demand for gold. And as industrialization and urbanization continues, that will also be strongly supportive for copper demand as well. And with the -- as an example of this, with the increased deregulation of the gold market in China, every major bank in the country now provides a gold savings account product. And the gold accumulation plan started by ICBC and the World Gold Council has already led to almost 2 million accounts holding gold in just 18 months. So this Chinese retail demand potential is another very supportive factor for the gold price. And these factors, among others, continue to support, what we're seeing now, the gold price strongly moving back up. And with that, I'll hand it back over to Aaron.

Thanks, Jamie. So in closing, we are pleased with the results of the quarter and believe that Barrick is very well positioned going forward. The fundamentals for our industry are quite positive. We have been and will continue to be a major beneficiary of improving prices, and it has been reflected in our expanded margins, record earnings and cash flow and returns in equity. We have a growing production base with a strong development and project pipeline. 2 of those projects: Pueblo Viejo, Pascua-Lama are going to be producing in the short term. Pueblo Viejo, less than year from now; and Pascua-Lama, less than 2 years from now. These 2 world-class projects are anticipated to generate combined annual EBITDA of around $2.6 billion at prices below where we are today and will have a significant impact and a positive impact on our overall cash cost. We continue to advance our deep pipeline of world-class projects, which offers us further investment options in the future. Our exploration commitment and strategy is yielding major results with new discoveries such as the ones at Red Hills and Gold Rush. And we have growing cash flows which, along with our positive outlook, supports our ability to return capital back to shareholders. So in conclusion, we feel that the Barrick story is a compelling one and an attractive investment for our shareholders. So that concludes our formal remarks. At this point, operator, we'd be happy to take any questions.

[Operator Instructions] And the first question coming from the line of John Bridges, JPMorgan. John D. Bridges - JP Morgan Chase & Co, Research Division: I was just wondering, the beat on the gold price, how did you get to that big number? It seems a little bit big for it just to be timing issues.

Sure. Well, Jamie, why don't you take them?

We manage the gold sales opportunistically. And as you saw in the quarter, there was a fair bit of volatility. So we look to time our gold sales opportunistically. We do transact in options, gold options, to generate premium and also position ourselves in the gold market. So that combination of managing the sales and the timing in the market is something that we did particularly well in the third quarter through a volatile market. And that's how we generated that additional realized price over the spot price. John D. Bridges - JP Morgan Chase & Co, Research Division: For a moment, I was afraid that you might be hedging.

No. But no, there's no -- hopefully, no.

Yes. John D. Bridges - JP Morgan Chase & Co, Research Division: Okay, just a follow-up. On Zaldivar, the feasibility study on that is due soon, I believe. I wonder if there's any sort of update on that?

The Zaldivar sulfides? John D. Bridges - JP Morgan Chase & Co, Research Division: Yes, feasibility, yes.

The feasibility study...

Feasibility this year.

Yes, the pre-feasibility will be probably early -- will be next year, and then it'll take us some time to do the bankable feasibility study after that, which we anticipate probably 2000 -- what's the latest schedule, Ivan?

I'd say Q1 '13.

Yes, so 2013 for the bankable feasibility study.

The following question coming from the line of Greg Barnes, TD Securities.

Aaron, couple of questions. First on the dividend. Obviously, it's good to see the dividend increase. But on 2012, at current gold prices, we're looking at a payout ratio, our estimate is about 15% after CapEx is spent. Is that a level you're comfortable at? Or do you see a higher payout ratio being something you could sustain?

I think, Greg, as Jamie highlighted in the presentation, we're trying to strike a balance between investing in the projects we have, managing the balance sheet and returning capital back to shareholders. And so when you look at where we are today and in 2012, we will continue to have a fairly healthy CapEx program, particularly as we finish off Pueblo Viejo and Pascua-Lama. And so there will be capital demands, which will be required there. And so I think that the dividend increase that we announced today, clearly, we're comfortable with it. And as we get further into 2012, and if the markets continue to perform as we expect, then clearly, we'll be -- continue to revisit our dividend levels, consistent with what has happened over the past 5 years.

Okay. Second question, I couldn't help but noticing on the slides at Chimiwungo that you got a $3.50 per pound copper pit shell on there. Should I be drawing any conclusions from that?

No.

No in terms of your long-term price or resource out for that mine?

No, that's not indicative of what we think the long-term price is. But for planning purposes, that's what the exploration folks have used.

The following question coming from the line of Paretosh Misra with Morgan Stanley.

Two questions actually. One is, I noticed there was a CapEx increase for 2011. Any main drivers there?

The CapEx increase this year reflect the increase of amount of expenditures at both Pueblo Viejo -- primarily at Pueblo Viejo and Pascua-Lama. And that's consistent with the increases that we announced in the second quarter.

Got it, okay. And the second, I was hoping if you could share some thoughts on the right capital structure for the company, like, do you have any debt-to-EBITDA or debt-to-capital that you target for the company?

I think that as a -- one of the overriding objectives we have is to preserve strong credit ratings. Right now, we do have, I think, good credit ratings. We're A- with S&P and Baa1 with Moody's. And so we're kind of consistent, or the ratings are kind of consistent with where we'd like to see. So we kind of, I think, use those as a benchmark in the ratio, some of the ratios kind of come out of that. I'd suggest though that our preference would be -- we have taken on some debt for the Equinox transaction, and our preference would be to delever the balance sheet somewhat, but in line with, as I said earlier, balancing, returning capital back to shareholders, as well as investing in the opportunities we have in our pipeline.

The following question coming from the line of Jorge Beristain, Deutsche Bank.

I had 2 questions. Maybe a first one for Aaron. If you could clarify again some of the comments you made earlier about the new Argentine emergency decree that they've passed to keep, as far as we understand, 100% of export revenue in the country. Could you just clarify if there would be any exemptions for Pascua-Lama or how you would manage that FX exposure?

Okay. Maybe I'll make a few comments, and then I might ask Kelvin Dushnisky, who's our of Head of Government Affairs, to comment as well. We understand the -- the mechanism, or the way it works right now is -- and this is, I guess, what the oil and gas industry had been working under, is previously, 30% of their revenues, they would have to repatriate. And then, there's a process to, again, to take them out of the country. And so based on that process, as we understand it, that the revenues that we would generate, you have to bring back, but then you can subsequently remit them for dividends or debt repayments or other means. But they will be subject to a transaction tax which I understand is about 1.2%. So that's the mechanism. In terms of -- so as we understand it, there's no restrictions in terms of our ability to get capital out of the country. There's just a process that you have to go through to achieve that. We have that discussion, as I mentioned, with the government. Kelvin, I don't know if there's anything else you'd like to add?

Aaron, I think you've covered it well. I mean, it's not about a prohibition on currency exchange, about control, and we're having those discussions right now with the government, so I think you've covered it well.

And my second question, this was related to the guidance that you're intoning, I think, about a 10% cost inflation for 2012 estimates. And my understanding is because of your proactive hedging as you mentioned on oil, you're basically covered there. You do a lot of FX hedging, steel prices are falling globally. So where is it that you're seeing the greatest amount of cost inflation that would lead you to have this kind of overall 10% increase?

Jorge, I think it's probably 2 things we'd point out. As you pointed out and as Jamie highlighted, we do have protection against some of our commodity exposures, energy and currency. But one of the other areas however, is labor. And so we are seeing a significant labor inflation in many places where we operate, ranging from 8% or so in Chile and Argentina, probably north of 20% -- sorry, 8% in Chile and Peru, up north of 20% in Argentina, 70% in Australia, north of 8% in Tanzania and north of 10% in Zambia. So I think labor is a big component. And then the other...

Sorry to interrupt. Did I hear you say 70% or 7% in Australia?

7%. 7%, sorry. Yes. You going to have some pretty happy people in Australia if they got 70%. So that's one of the drivers. And the other driver is royalties. So with the higher gold price, if that's to have an impact. And then the last factor is really mix in terms of where the ounces are coming from next year and the impact on grades.

The following question is coming from the line of David Haughton with BMO.

You've had a pretty good year so far this year. Jamie has given a little bit of an insight into 2012 that Jorge had also touched on. The exploration success, I guess, has been a bit of a standout for Rob. When thinking about the 2012 budget, can you see an increase in money going towards Rob's endeavors?

Yes. I think that as we -- our approach to exploration is not to have a fixed budget. There's a base budget and then where we will increase it depending on success. So I think that you can see the increase in exploration budget this year was up quite a lot compared to last year. And I think it really reflects the progress that Rob has been making, particularly at Gold Rush and Red Hills, as well as Turquoise Ridge and some of the programs that we have. And so you shouldn't be surprised to see that the exploration budget might be up as well.

Of course, the other part of that is just an acceleration of some of the work that you're doing, turquoise Ridge, you're looking at the pre-feas coming out later 2012, feasibility possibly '13. Can you see that timeline being compressed?

To be realistic, probably not. I assure you that we would like to compress it as much as we can for all of these programs. But the reality is there's just a lot of work that has to be done, and it just takes time. So we are trying to move forward as fast as we can, but there are just practical limitations to our ability to do that.

And I guess another one, just wanting to pin you down a little bit more is looking at Red Hill and Gold Rush. Obviously, a very interesting and growing development. What kind of timeline can you put around that to bring it into a production base?

Well, I think I'll ask Rob to maybe comment on that.

Okay. So just to reiterate, the objective of 2011 and 2012 program is really to scope out the entire extent of the mineralized system ,and also to define a measured and indicated and inferred resource, hopefully around the end of 2012. But that's obviously going to depend on the ultimate scale and the footprint of those deposits. And this program's including step-out holes to define the limits, as well as the infill holes to confirm the continuity, and drill spacings roughly at about 150 to 200-foot centers. The resource that we generate, that's going to form the basis of the pre-feasibility study. And we've already started preliminary engineering and scoping level studies such as geotech work, metallurgy, hydrology, environmental and so on, and they're being carried out concurrently with the exploration program to try and advance the project as quickly as we can. So once the final geological modeling has been completed, hopefully around Q2 2013, again depending on the ultimate scale and footprint, the pre-feasibility study is planned to commence, and that's probably going to take about a year, Peter, to complete?

Yes.

And preliminary condemnation drilling is also planned to commence in 2013 to try and determine where the prospective areas are -- or rather, the less prospective areas are for placing waste dumps, infrastructure and to support the engineering studies. Beyond that, [indiscernible] extensive permitting phase.

With that infrastructure, are you thinking here about a stand-alone operation, or as a satellite for some existing infrastructure?

It's Peter here. We're actually doing some various trade-off studies, David, while we look at -- one option is to rail the ore to Goldstrike where you've got an existing facility, which is obvious you've got lots of benefits versus stand-alone. So that's in the process at the moment.

The following question coming from the line of Adam Graf, Dahlman Rose. Adam P. Graf - Dahlman Rose & Company, LLC, Research Division: Just to revisit the Argentine situation. So my understanding from your comments that you anticipate approximately a 1.2% transaction fee on all revenues coming from Veladero and potentially part of Pascua-Lama?

Yes, that's our understanding of how the mechanics work. Adam P. Graf - Dahlman Rose & Company, LLC, Research Division: And when will that -- will that kick in, in the fourth quarter?

Well, the decree is immediate so theoretically, it would. I think the thing that we have to work out is we're investing in Pascua-Lama, the capital right now. So we can use the capital from Veladero to be redirected. Well, it's already being redirected to invest in Pascua-Lama. So there might be some benefits from that. But we just -- we're still working this through, so we haven't been able to come to grounds just on exactly what the impact might be in the next couple of years. Adam P. Graf - Dahlman Rose & Company, LLC, Research Division: And then just a follow-up, the transaction fee. So if you were to take your dollars and then buy the pesos, that incurs the 1.2% transaction fee? And then is there also a transaction fee if you were to attempt to -- once, presumably Veladero and Pascua-Lama combined, were generating net positive or free cash flows, then you would then also have to incur a transaction fee in order to take those pesos back to dollars to take them to Canada. Is that...

Yes, I think there's probably 2 things here. The first is if you deposit money, you pay 0.6%. And then when you withdraw money, you pay 0.6% so that's the 1.2% that we're referring to. Yes. Adam P. Graf - Dahlman Rose & Company, LLC, Research Division: Okay. You don't pay it twice, is what I'm getting at.

No. Well, yes, you're paying 0.6% and 0.6%. You're paying 0.6% twice. Adam P. Graf - Dahlman Rose & Company, LLC, Research Division: Got you. Okay. Well, I think that certainly clears things up on this issue that's certainly impacted the markets, some of the names in the market yesterday and has not been clarified by others.

Right. Okay. Well, look, as we learn more, if there's anything relevant, we'll obviously keep you informed.

The following question coming from the line of Pawel Rajszel, Veritas Investment Research.

Just a couple of more questions on Argentina and the situation there. Do you have any sense about how permanent or temporary the decree is? And then is this transaction fee a kind of withholding tax? Is this -- in other words, is this transaction fee going to the government?

On your first question with respect to permanence, we don't have a sense of that. As I said, we've -- I think this was -- as it was just introduced yesterday, and we've had some preliminary discussions with the Secretary of Mines and some other government officials, we don't have a sense yet at this point. And so your second question was -- if you'd repeat your second question?

Withholding tax, is the transaction fee a kind of a withholding tax? Is that transaction fee going to the coffers of the government for example?

I assume it's going to the coffers of the government. But the transaction fee applies to everybody. So even in-country transactions are subject to this transaction fee.

Okay. And then given that Pascua-Lama is on the border, do you see a kind of split of the revenues there? Can you manage where the production can be originated from -- sourced from officially to mitigate the transaction fee?

Yes. That's an added complication for Pascua-Lama, and I don't have an answer for you at this point.

Okay. And it seems like Argentina is trying to slow this flight of capital that they've been having, and the math doesn't really make sense for me in terms of it being a valid solution. What's your sense of how far Argentina might be willing to go in terms of maybe being more harsher on the mining industry in order to achieve their goals?

I don't think we're really in a position to comment. What I would say is that there's been a lot of support for our operations in Argentina from both Governor Gioja, who's the governor of San Juan; as well as President Kirchner. And so we clearly draw comfort from that. But beyond that, I'd really be speculating.

Okay. And then lastly, just on Zambia, do you have a particular tax range in mind for the change?

Kelvin, do you...

There isn't. I can tell you though that we're there, and we've met with the Ministry of Finance, as well as the Mines Ministry on our own and together with the chamber. And the feedback we've received is that the government is looking for the industry to help contribute to the budget for 2012. They've been clear that they don't want to impose something that's considered unreasonable or creates any negative implication, longer-term implications for the industry. So they're taking a very consultative approach but at this point, there haven't been conclusions reached but very constructive engagement.

And our last question coming from the line of Brian MacArthur, UBS.

I'm sorry to go back to Argentina again, because I realize it's a developing situation. But can you just remind me how much the original capital Pascua-Lama would've been spent from the Argentinian side versus the Chilean side? Because presumably, if you can use your profits from Veladero into that zone, unless it's viewed as an exclusion zone, I would've thought in the near term, regardless what happens or ultimately comes out, there'd be a fair bit of shelter. Or is that incorrect?

Well, in terms of your first question, the capital on the Argentinian side is roughly about 2/3 of the overall capital. The Chilean side is really more about the mine, mine development, whereas the process and facilities are on the Lama side or the Argentinian side.

Okay. So if you can repeat -- presumably, profits in Veladero stay in the country and theoretically would not be affected by this? Or is that not -- you're sort of indicating you may be able to shelter it a bit. Or is that correct?

Brian, we're still working this through. Like the -- the transaction tax will likely still apply because you still have money going in, and then you have to redirect it towards the capital for Pascua-Lama. So preliminary, and we'd have to confirm on this, but intuitively, I think that that still applies. But what you may avoid is the issue of potentially having a currency exposure between the timing of the phases when you get them out. So you might be able to avoid that.

That helps a lot. And just secondly, you talked a little bit about production mix being one of the factors next year. Obviously, we have Pueblo coming in, I don't -- maybe half or quarter of a year, that should be lower. Cortez obviously had a good year this year, maybe it's not quite as good. But can you just go over where, just roughly, the production mix changes? It's just taking like lower grade stuff out of the big pits because the globe price has gone up? Or is it like a change in South America from just Lagunas and Veladero? Just where are the major production mixes would be year-over-year?

Brian, maybe you can bear with us. We're still finalizing our budgets for next year. So on a preliminary basis, that's sort of the picture that we have. PV for example, there won’t be a huge amount of production out of PV because we'll be ramping up and because we're at the early stages. Those'll probably be higher-cost ounces until we get it ramped up. But that's -- maybe you can bear with us. And in our February call, we'll be happy to give you a lot more details.

I will now turn the call back to Mr. Regent. Please continue with your presentation or closing remarks.

Okay. Well, thanks, operator. Well, thank you for everybody for joining our call today, and we appreciate your questions. And with that, we'll conclude the call, and I hope you all have a good day. Thank you.

Thank you. Ladies and gentlemen, that does conclude our call for today. We thank you for your participation and ask that you please disconnect your lines.