Newmont Corporation (NEM) Q4 2011 Earnings Report, Transcript and Summary

Good morning, and welcome to the Newmont Mining Fourth Quarter and Full Year Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, please disconnect at this time. And now I'd like to turn today's conference over to Mr. John Seaberg, Vice President of Investor Relations for Newmont Mining Corporation. Thank you.

Thank you, operator, and good morning, everyone. Welcome to Newmont's Fourth Quarter and Full Year 2011 Earnings Conference Call. Joining us today are Richard O'Brien, President and Chief Executive Officer, and other members of our executive leadership team. Before we begin this morning, I'd like to refer you to our cautionary statement on Slide 2 as we will be discussing forward-looking information, which is subject to a number of risks, as further described in our SEC filings, which can be found on our website at newmont.com. And now I'll turn the call over to Richard.

Thanks, John. For those of you on the webcast, we'll begin on Slide 3. 2011 was another step in the transformation of our company as we built upon the strong foundation of our core operating regions and defined the next phase of our evolution. We are continuing to make progress on the strategy we discussed with you at April Investor Day last year. We discussed delivering competitive growth and returns, unlocking our exploration upside, maintaining a strong balance sheet and returning capital to our shareholders through a gold-linked dividend. And while strategy sets the future, execution sets the base. So as we've been saying since 2007, everything at Newmont begins with execution. Good performance in our operations allows us to do many things. And in 2011, we delivered again on our original expectation and outlook for the year. Gary Goldberg will talk more about that in a moment. Also in 2011, we took tangible steps to move our project pipeline forward. In particular, we announced initiation of construction at Akyem in Ghana, Conga in Peru and the Tanami shaft in Australia, which Guy Lansdown will speak to later in the presentation. And as we have said, competitive returns do require capital discipline. And from time to time, this means that not every project makes it to the next stage of development, and Hope Bay is such a project. And Russell will speak about the financial statement impacts of removing Hope Bay from our development pipeline later in the presentation. With respect to the exploration upside, we had a successful year and delivered on our exploration program. As you saw yesterday, we announced year-end reserves of 99 million ounces of gold and nearly 10 billion pounds of copper. To put this in perspective, by year-end 2011, with 5.3 million ounces of net additions, that net additions exceeded the sum of the net reserve additions published by the other 4 North American senior gold companies combined. So for the near term, our exploration team is focusing on numerous opportunities, one of which is Long Canyon, Nevada, and Guy will provide you more information on that momentarily. I'd just like to mention another exploration opportunity because Gary Goldberg and I just recently returned from Indonesia, where we were briefed on progress at the Elang exploration project, where we have 2 drill sites working already and we're adding a third. This is a longer-term prospective opportunity for Newmont, which is a large copper gold porphyry with similarities to our Batu Hijau project. And it's projects like Long Canyon and like Elang that underpin our belief that we can continue to deliver reserve additions through the drill bit that will, over time, allow us to discover the Newmont behind Newmont. We will pursue our new projects and continue to explore and fund our exploration and development program and return capital to shareholders. We can do all of that because we have a strong base of operating cash flows and a very strong balance sheet. In 2011, through our gold-linked dividend, we paid out nearly $0.5 billion in dividends or $1 per share, equating to only 23% of our adjusted net income. And as you know, we designed our gold-linked dividend to enhance investors' leverage to gold price, and it delivers. Since we announced the enhanced gold-linked dividend, Newmont's share performance has more closely correlated to the gold price than any of our peers. By delivering on our strong strategy and maintaining our track record of operational execution, all of that underpins the success of this company and we can only accomplish that through the hard work and dedication of all of our employees, contractors and business partners across Newmont. And I want to thank all of those people for their efforts throughout 2011. But I also know that human capital strategy is important for the future and continuing to be able to retain our existing employees and attract some of the best expertise in the industry is important to our future as well. And I would just like to acknowledge one example of that in Gary Goldberg, who recently joined us. Gary joined us in December as Executive Vice President and Chief Operating Officer, and he will speak in a little bit. He was most recently President and CEO of Rio Tinto Minerals and is a past Chairman of the National Mining Association. Gary brings to us 30 years of experience in the mining business and is responsible now for Newmont's worldwide mining operations, health and safety, business excellence and security. Looking forward to having Gary's contributions at Newmont for some time to come. Turning to Slide 4. You'll see an update of the growth project pipeline that we originally communicated to you last April at Investor Day. As you can see, our North America and Africa regions each have the potential to contribute approximately 800,000 ounces of annual production growth, while our South America projects, both in Peru and Suriname, collectively have the potential to contribute 1.25 million ounces of annual production growth. You'll also see in the yellow box around South America that we have updated our forecast here to allow the indication that we've seen recent activities in Peru. So on November 30, we indicated that we had suspended operations at the Conga project in agreement with the government of Peru. On December 27, the government announced its intention to have a third party re-review Conga's Environmental Impact Assessment, a process that they indicated would take about 40 days. On February 17, the government announced the panel of experts that had been retained to conduct this review. At this time, it's still our intention to develop the 3 projects denoted in yellow on this slide, which include Conga, Cerro Quilish and the Yanacocha expansions. We're encouraged that the EIA review of Conga is underway, and we look forward to hearing the results in the near future. However, as we stated back in November, should we be unable to continue with our current development plans at Conga, the scale and diversity of Newmont's global portfolio provides us with flexibility to reprioritize and reallocate capital to maintain our focus on delivering our strategic objectives through potential development alternatives, with alternatives in Nevada, Ghana, Australia and Indonesia. Now I'll turn the call over to Russell Ball, our CFO, and to discuss our full year financial and operating results.

Thanks, Richard, and good day, everyone. As you can see on Slide 5, a lot of numbers for the fourth quarter and the year, and I will touch on some of the highlights, with a focus on the full year numbers since these are more reflective of the long-term nature of our business. For 2011, we generated record revenue of $10.4 billion; adjusted net income of $2.2 billion or about approximately $4.39 a share; and record operating cash flow of $3.6 billion, clearly benefiting from continued delivery and execution of the business plan and a strong gold price environment. Gold operating margins increased 32% to $971 an ounce despite a 22% increase in operating costs. As outlined at our Investor Day last April, the operating cash flow has been and continues to be redeployed back in the core gold business through aggressive development of our project pipeline and through the cash acquisition of Fronteer Gold last April, an acquisition that I believe will add significant long-term value for our shareholders, to fund increased near-mine and greenfield exploration. And as Richard mentioned, in line with our gold price-linked dividend, we returned $1 a share or approximately $500 million to our shareholders last year. In addition, we have significantly deleveraged the balance sheet over the past 26 months, with debt repayments of $430 million in 2010, $265 million in 2011, and as described in the subsequent event note in our recently filed Form 10-K, almost $800 million in the first 2 months of this year. We continue to evaluate our capital structure. And with net debt at year end of only $2.5 billion and a liquid marketable securities portfolio with approximately $1.5 billion at year end, we have significant flexibility to add long-term debt without impacting our current investment-grade ratings, especially in light of the current favorable interest rate environment. Turning briefly to the fourth quarter, production and costs were largely in line with our expectations although, as you will no doubt have seen, we took a $1.6 billion after-tax impairment in regard to the Hope Bay project, which I will cover in more detail shortly. Adjusted net income of $1.17 a share was roughly $0.10 short of consensus, of which $0.07 can be explained by an increase in concentrate inventory on hand at Boddington in Australia due to some shipping constraints in late December. This increase was simply a timing difference, and that inventory was sold early in the first quarter. This is a long-term business, and quarterly inventory fluctuations of up to 50,000 ounces aren't uncommon for us, especially at operations where we are shipping concentrate as opposed to doré. In addition, the spending on exploration and advanced projects was back-end weighted, and we played a little bit of catch-up in the fourth quarter, and that's reflected in our earnings per share. We also realized $1,670 an ounce versus, I think, the LME average for the quarter of $1,683. Almost all of this is attributable to the pricing of our concentrate sales shipments, which effectively price over a rolling 3-month period from shipment as opposed to doré, which essentially prices overnight. Moving to Slide 6. You'll see that our operating performance for 2011 was in line with our original outlook from last February. Attributable gold production of 5.2 million ounces was right in the middle of our range, although down by 4% from a year ago due to less Phase 5 ore mined at Batu Hijau, resulting in the treatment of lower-grade stockpiles and also lower leach ore placement at Yanacocha. This was partially offset by higher production at North America and Ghana in Africa. Gold cost applicable to sales of $591 an ounce was $1 above the high end of our original outlook, and I will go into that in a little more detail on the following slide. Attributable copper production was on target, although down significant from last year at Batu Hijau for the reasons discussed previously. Copper production at Boddington increased 21% over 2011. Copper CAS of $1.26 a pound was at the low end of our original outlook, resulting largely from the relative outperformance of gold versus copper and the corresponding lower allocation of operating costs to copper revenue. Copper CAS was up substantially from 2010 in light of the Phase 6 stripping campaign at Batu Hijau, which will continue until the end of 2013. Slide 7 provides more detail on cost applicable to sales on a per-ounce basis for 2011 through a waterfall from the original budget of $572 an ounce to the reported $591 an ounce. As reflected on the chart, the stronger Australian dollar added $18 an ounce, although this was offset by $9 an ounce in Aussie dollar currency hedge gains. The relative outperformance of gold over copper added $11 an ounce to our gold CAS due to coproduct accounting for costs at Boddington and Batu Hijau. The higher-than-budgeted realized gold price added $7 an ounce in higher royalties and workers participation. As I've commented on previous calls, we're more than happy to pay these incremental costs, given the significant related margin expansion. On the positive side of the equation, higher by-product credits, primarily silver for us, reduced CAS by $8 an ounce, and a reallocation of certain mining-related taxes from CAS to the income tax expense line reduced CAS by a further $7 an ounce. Adjusting our reported CAS solely for the impact of the stronger relative performance of gold over copper and higher-than-budgeted gold price resulted in adjusted cost applicable to sales of $573 an ounce, just below the midpoint of our original outlook from a year ago. It should also be borne in mind that our costs are reported under U.S. GAAP, which generally adds between $20 and $50 an ounce to similar costs calculated under IFRS, due to the different accounting treatment for deferred stripping and stockpiles in particular. Looking at the table on the right on Slide 7, net income for the year of $366 million was impacted by the following: a non-cash impairment charge in the fourth quarter of $2.1 billion on a pretax basis, or $1.6 billion on an after-tax basis, related to our Hope Bay project in Canada. We made a decision in January to place Hope Bay on care and maintenance after evaluating numerous development options against other opportunities in our portfolio. At the end of the day, our desire to generate a return on invested capital in excess of our weighted-average cost of capital versus simply producing ounces for ounces' sake drove us to put the project in care and maintenance and reallocate capital to higher-returning projects in the portfolio. The write-down had no effect on cash flow or reserves, and Hope Bay was not included in the company's 2017 strategic growth plan outlined in April last year or in our capital expenditure outlook for 2012 announced in January. The other impairments of $105 million were primarily related to a third quarter charge for Paladin and Pilot Gold marketable securities acquired as part of the Fronteer acquisition; favorable tax planning opportunities which, by definition, are hard to predict added $65 million to the bottom line; and the loss from discontinued operations that arose during the fourth quarter on a royalty dispute relating to St. Andrew Goldfields. Taking the above into account, we reported adjusted net income for 2011 of roughly $4.40 a share. Turning briefly to our 2012 outlook for CAS, which we announced in January. Slide 8 breaks down the 10% increase year-over-year by region and cost driver. In addition to industry-wide inflation pressures, I would just note the following: the increase in Asia Pacific costs reflects the higher allocation of cost to gold through by-product accounting; higher wage rates in Aussie dollar terms; the recently approved carbon tax that goes into effect on July 1, 2012; and a higher Australian dollar assumption. Looking at cost drivers, labor cost increases and consumable cost increases for fuels and bulks drove most of that increase. Moving to Slide 9. As we announced on Wednesday, the board approved the declaration of a first quarter dividend of $0.35 a share payable on March 29 to shareholders of record on March 15. This dividend represents an increase of 133% from a year ago, is in line with our gold price-linked dividend policy, reflecting a fourth quarter average realized gold price of $1,670 an ounce. Based on a $64 share price, this represents an industry-leading annualized yield of 2.2%, higher than the current year on the S&P 500, the yield on the 10-year Treasury and almost 260 basis points higher than the gold ETF. And finally, we continue to believe that at the end of the day, per-share metrics matter in this business. And in particular, we think that the full metrics depicted on Slide 10 are key determinants of long-term value creation for shareholders in the gold business. As we look at opportunities to put our shareholders' capital to work either in our own portfolio or externally, these metrics remain front and center in our minds. I will now call -- turn the call over to Gary for his perspective on our regional operating results.

Thanks, Russell. I'm really excited to be here. I've been following Richard and the team and the direction that Newmont's been taking, and I was attracted by Newmont's good reputation, focus on sustainable development and value creation. It's been a very busy last 3 months. I visited most of the operations and most of the major projects across the globe, and we've got fantastic assets, great people and some good opportunity across the group. I bring a passion for safety, which is shared across the business. Despite this good focus, we did, unfortunately, have 5 people from our workforce and contractors lose their life in 2011 and clearly, this is not acceptable. I'll be working with the team to accelerate our safety improvement efforts going forward in 2012. On Slide 11. Comparing Newmont's production and cost profile from 2010 to 2011, the power of the portfolio is evident. As Russell mentioned earlier, while year-over-year production was down about 4%, results were in line with our outlook as production from North America and Africa offset anticipated declines in South America and Asia Pacific. From a cost standpoint, the largest impacts were also felt in our South America and Asia Pacific regions. Again, this performance was anticipated and included in our outlook as we expected lower production in both of these regions. And in particular, we expected Asia Pacific's cost to reflect the processing of stockpiled ore at Batu Hijau as we transition from mining and processing Phase 5 ore in 2010 to stripping Phase 6 and processing lower-grade stockpiles in 2012 and 2013. For a detailed discussion of mine-by-mine performance, please see yesterday's release and 10-K. For this morning's call, I'd like to focus my regional remarks on key drivers of production and cost in 2011. Turning to Slide 12. Our North American 2011 production was up slightly from a year ago due to new contributions from underground mining at Exodus and Pete Bajo, as well as the completion of slope remediation work at Gold Quarry, which is partially offset by lower production from our underground mine, Chukar. Gold CAS was higher due to higher surface mining and milling costs, partially offset by higher silver by-product credits. In 2012, priorities in Nevada include the Leeville ventilation shaft repair work, which we expect to complete in the first half of this year. I'd also like to point out that our outlook for the year at Nevada of 1.7 million to 1.8 million ounces of production includes the expectation of seasonal downtime in the second quarter as a result of planned maintenance on our roster, as was the case in 2011. Moving to Slide 13. Our South American region successfully met outlook despite roadblock activity that temporarily affected access to our Yanacocha mine during the fourth quarter. Gold production for the year was lower at Yanacocha relative to 2010 due to lower leach pad ore placement and partially offset by higher grades and recoveries. Gold CAS was higher due to lower production, higher mining costs and lower silver by-product credits. Turning now to our Asia Pacific region on Slide 14. The year-over-year comparisons reflect the impact of the stripping campaign at Batu Hijau, which is expected to continue through the end of 2013. As a result, both gold and copper production were lower than a year ago for the region, partially offset by higher mill throughput and higher copper grade at Boddington. Both gold and copper CAS were higher due to the lower production, higher waste mining and higher labor and commodity costs. Turning to Slide 15. To shed a little additional light on Batu Hijau, the Phase 6 stripping campaign is expected to conclude in late 2013, and we expect to be back in the higher grade ores in 2014. In the picture you can see on the left, which was just taken last week, we're looking towards the south, and you can see the wider areas in both the south and back towards you in the north. That's the stripping that's going on and its relative position to the rest of the pit. We're up at the top, and we'll be working our way down over the next couple of years to uncover the higher-grade ore in the bottom of the pit. I'll conclude the regional discussion on Slide 16 with Africa. Ahafo's contribution to the portfolio was greater than the prior year due to the addition of material from the Amoma pit. Fourth quarter 2011 gold production was lower than a year ago due to lower mill grade and increased inventory. Gold CAS in 2011 was higher due to higher labor, commodity and royalty costs, and was partially offset by higher production. I'd like to now turn the call over to Guy to discuss our exploration results.

Thank you, Gary, and good day. Here on Slide 17, we've summarized our 2011 gold exploration results. We are really excited to have added about 12 million ounces in 2011 to achieve a record gold proven and probable reserve base of around 99 million ounces, a net increase of about 6% over last year. In addition, we grew our gold NRM by about 12% in 2011, while increasing gold in our earlier-stage resource categories. To deliver these results, we employed 125 drill rigs and drilled approximately 1.3 million meters to deliver our fourth consecutive year of reserve increases for gold and copper. 2012 exploration priorities include Long Canyon, Leeville, Carlin, Mike, Phoenix and Fiberline in Nevada. Supporting the development of a new district in the Guiana Shield in South America, we are conducting extensive development infill drilling at the Merian project in Suriname, with the aim of adding reserves in 2012 -- of adding NRM in 2012. Follow-up drill programs at the nearby Sabajo project are coming up with promising results. In the Asia Pacific region, we plan to build on our 2011 success at the Callie underground mine in the Tanami and at KCGM operations, while Jundee and Waihi drill programs should continue to add new underground mine life from surface and underground drill programs. Each of these sites have great exploration potential that we plan to continue aggressively testing in 2012. Meanwhile, in Africa, drill programs successfully expanded the wingspan of early-stage Subika underground mineralization, and we began drilling extensions of the Apensu open pits. Early-stage activity around Ahafo North demonstrated potential for additional open pit and underground mineralization near the existing reserve. Drill programs at Akyem suggest potential for underground mineralization. We will continue with these programs in 2012 as we expand our exploration efforts in Ghana. Over the last 10 years, we have been a leader among our peers by delivering 85 million ounces of reserves through organic growth alone at a very competitive total unit reserves cost, including ore exploration costs of approximately $25 per ounce, which more than offset 75 million ounces of depletion. On Slide 18, we had similar success with our copper exploration efforts, boosting total reserves by 600 million pounds before depletion to a record of nearly 10 billion pounds, an increase of about 3% over last year. In addition, we grew our copper NRM by about 11% in 2011. 2012 exploration efforts will focus on copper targets in the earlier stages of our pipeline at Elang and Copper Basin in Nevada. Turning to Slide 19. We have only had our Long Canyon project for about a year, and we are very encouraged at the progress that we have made to-date. In 2011, our aggressive 59-kilometer drilling program resulted in an extension of the known mineralization by about 25%. As you can see from the section on the lower half of the slide, we have encouraging grade and thicker mineralization that supports our original thesis at the time of acquisition. For 2012, we plan to conduct over 70 kilometers of infill, expansion and district exploration drilling that should form the basis to declare our first NRM at Long Canyon in 2012. From a development standpoint, we are on track to submit our plan of operations in the first quarter of 2012. Slide 20 summarizes our 3 major projects, which are currently in execution and were approved by our Board of Directors last year. Our Akyem team is making great progress. The engineering is essentially complete and overall progress is on track at about 30%, with civil and concrete works well underway and structural steel work commencing in January. Construction activities remain suspended at Conga while we await the completion of the EIA review. Engineering continues and is approximately 85% complete. All major equipment has been ordered, and the team is currently developing plans for restarting construction activities. At Tanami, engineering is progressing and main construction contracts are about to be awarded, while the shaft pilot hole drilling is in progress. Now I'll turn it over to Richard for his concluding remarks.

Thanks, Guy. I'll conclude by reiterating our commitment to delivering shareholder value through execution on the 5 components of our strategy. We will pursue growth but not growth at any cost, and it will be growth that delivers competitive returns. Our 2011 performance affirms that Newmont will continue to execute on its operating base, continue to realize its exploration potential and continue to build competitive projects that deliver competitive returns. And finally, by maintaining a strong balance sheet and generating robust operating cash flows, we will remain a unique investment platform because we can return capital to shareholders while providing competitive growth, delivering ounces which produce current cash flow and allow us to continue to drive the business forward, both for today and for the future. So combined, these components provide a powerful and compelling value proposition that we believe truly differentiate this company and position us for the future. So with that, we'll be happy to take your questions and thanks for listening.

[Operator Instructions] Our first question from John Bridges, JPMorgan. John D. Bridges - JP Morgan Chase & Co, Research Division: Just wondered, the cash has gone down this year. You've got this commitment to a dividend now, which is obviously working very well for you. I just wondered if Russ was going to duck into his piggy bank to maintain it going forward.

John, it's Russ. Yes, the cash was down. And I'd just like to remind people, we did pay cash for the Fronteer acquisition in April, $2.2 billion, because we didn't want to dilute our shareholders, knowing this was a long-term exploration plan. And as I mentioned earlier, we have deleveraged the balance sheet significantly over the last couple of years. And in today's interest rate environment, we are looking at an opportunity to answer at some [ph] long-term debt. And we are pretty conservatively geared, if you look at the financial metrics, and have plenty of flexibility. But you've seen the cash flow generation capacity of the existing assets. And in this gold price environment, we're blessed with that attribute. As Richard said, strong balance sheet, strong operating cash flows, we can fund the growth, the dividend and continue the investment in exploration off of our current business plans. So a great position to be in, John. John D. Bridges - JP Morgan Chase & Co, Research Division: Okay, so you're confident and that's nice to hear. And then maybe an operating question. It's probably a bit unfair given your short tenure there, but Boddington is on a run rate for 800,000 ounces a year. Could you talk a little bit about the progress with fixing up the plant and what you think it's capable of now?

Gary here. John, the guidance is for 750,000, just to be clear, looking out for the next couple of years. And having visited there just 1.5 weeks ago, the work that's been done to upgrade and improve the conveyors, which was one of the bottlenecks that we had, is going to be completed later this quarter. And the team there and the work that's been done all looks in line to be able to achieve the 750,000 guidance that we've given. John D. Bridges - JP Morgan Chase & Co, Research Division: Did you say -- I thought it was 750,000 to 800,000?

I'm sorry. 750,000 to 800,000. John D. Bridges - JP Morgan Chase & Co, Research Division: Right. Okay, cool. And if I might slip one last little one in, maybe. I see you've got a big inferred number there for Yanacocha now. Is that the sulfides that are beginning to come into play?

John, this is Guy. Yes, I believe that's where the bulk of the inferred material will be coming in.

Next question from Jorge Beristain, Deutsche Bank.

Jorge with Deutsche Bank. I guess my first question is for Richard. Again, just following up on the Conga update that you gave us. What is the next key date as to when you expect that sign-off from the committee on the EIS?

So Jorge, what we've been told is that from the time that the committee began its work was going to be 40 days for them to conclude their work. What we don't know is, at the time when that comes out, how long the government is going to want to review that outcome and when we'll find that out. So I would expect it's going to be at least 40 days from the time period when that was announced. We're hopeful that it's not an extended period beyond that 40 days, but we don't really know. So in the meantime, we continue to work at the site with the government just to ensure that things are maintained throughout the wet period as best we can. We continue to work on engineering and we continue to keep our project team together, while at the same time, Ramzi and Guy have worked hard to reduce current costs at Conga. So I think the best that we can do at this point is do everything we can to be flexible, be ready to go and be responsive to the government when the results of that EIA review come out.

Okay. But some of the nature of the opposition to the project seems to be grassroots and related to -- I mean, could there be a worse-case scenario where you do get a clean bill of health on the EIS and the government signs off quickly, but then there's still another local round of opposition?

Yes, so remember, I'm the CEO of a mining company. I'm not a politician, so what I have to say is just from my standpoint. But the Conga Project, I believe, is a well positioned, well studied project with a well-thought-out and, I believe, well planned EIA. I think we are doing everything we can to ensure that, that project moves forward. What happens in Peru, I really can't tell you what's going to happen in Peru. All I can tell you is that the president has spoken about the government support for Conga. And as you point out, there are regional politicians who have been opposed to Conga. How they settle that dispute, I don't know. All I can tell you is we commit that around the communities most closely to Conga, we're working very closely with those people. We want to embrace the fact that if there are reasonable changes that need to be made, we will make those, to make sure that we try as best we can to respond to any community concerns. We can't settle political disputes, but we will work hard to do everything in our power to make this go forward.

Okay, great. And if I can just squeeze a second quick question in to Guy. Just at Long Canyon, you said you'll have an NRM by the end of this year. Could you just kind of update us as to what you're looking at in terms of a conceptual resource size there at this point?

If you'll recall, the target case was of the order of 2 million ounces. And we're obviously hoping to achieve as much of that as we can. We still got drilling underway. We still got steady work underway. We still got modeling we've got to do, but that's what we will be targeting.

Our next question from Patrick Chidley, HSBC.

Just a follow-up on Long Canyon. Guy, did you say 2 million ounces or 10 million ounces?

I wish it was 10 million ounces, Patrick. Sorry, the targets that we hedged at the time of doing the acquisition, the base case was 2 million ounces. The drilling work that we've done, the study work that we've done, that we will undertake, we'll be targeting 2 million ounces -- up to 2 million ounces for conversion to NRM later this year. So that is 2 million ounces.

Yes, just to be clear on that, Patrick, what Guy said is 2 million ounces for NRM. That was the original plan that we saw at the time of acquisition. We also mentioned, though, that we saw a considerable upside over time. And at the time, we talked about the potential for up to 8 million ounces. What Guy is saying is not all of that is going to come in this year. We're going to continue that drilling program, and this is step one and in Phase 1 of what we expect to be a long-term development option here, which will provide us with considerable upside. That's what we said at the time of the acquisition. We still believe that, through all the exploration results we have today.

All right. But Fronteer had already outlined 2.3 million ounces, I think. Is that in addition to the 2 million ounces, you mean?

No, Pat, that's just 2 million ounces total of NRM that we'd be looking at bringing in. The numbers that were around or of the order of 2 million, I think, the Fronteer number was 2.3 million. We saw...

So it would be a confirmation of their numbers?

Yes, that's correct.

Patrick, it's Randy. I think that's absolutely what we're trying to say, the confirmation in the year 2012 of what was originally in the Fronteer numbers. And then, as Richard pointed out, we -- when we made the acquisition, we had anticipated considerably greater than that total amount over time. But what our question was trying to address was what we expect in 2012.

So basically trying to take what was a potential resource that was working for Fronteer, and they had not yet declared yet to NRM a higher standard of potential definition throughout 2011. And the work we're doing in 2012, bring what they had as a hope to the reality of NRM, and we're doing that throughout 2012. And then we'll continue to bring that into reserve, as well as bring what we see as potential resource into NRM in future years. And with that, we still have the full expectation that we'll see 8 million ounces. That's what we see today. It's still early days, but confirmatory drilling continues to keep that right in front of us. So I'd say the acquisition case is good or better than what we had in place at the time.

And then just a follow-ups also on your exploration programs. Can you outline what work went on last year in Nevada at Mike and Fiberline and the Greater Gold Quarry, and how that might play out this year?

Yes, Patrick, what I'm going to do is ask Grigore Simon, our Vice President of Exploration, to talk a bit about that. And I did want him to address the question from John Bridges earlier around the inferred material at Yanacocha.

So I am going to address first John's question then. Most of the inferred material that the question referred to is coming from Conga, to be precise. To follow up on the question on Long Canyon, Patrick, that you had and the rest of Nevada, at Long Canyon, I think, you got the message that we are confident that we will deliver on the target case that we mentioned and look at this NRM as the very first step to get there. Going to Mike and Fiberline, what we have done is, we are still in the scoping study there, so we have done quite a lot of drilling in preparation for moving and advancing actually these ounces to an NRM category. So the programs remain on track. We are spending money on both, and we are dealing them both. And they look actually quite good. As far as Gold Quarry is concerned, Gold Quarry is going to deliver ounces for years to come. Just to give you an example, in the reserves program this year, Gold Quarry had the significant contribution again. It's almost 800,000 ounces just from pit expansions. If you look into the NRM, again, Gold Quarry came with significant ounces as part of the Phase 8. We expect to bring more reserves next year. So I will say that overall, all Nevada programs actually are very vibrant.

Very good. I hope to continue to hear more about those programs through the year and what the progress is toward that scoping study on Mike, in particular. And then one final thing, I just wanted to ask if -- is the appropriate strip ratios for the new reserves, is that available in the 10-Q? Or if not, will you provide it, please?

Yes, it's in the reserve -- Patrick, it's Russ. It's in the reserve table in the 10-K. You can see the ore and the recovery and the strip ratio.

Next question from Mike Jalonen with Bank of America.

I guess, not to beat a dead horse, just on Long Canyon, Guy, what's the strike extent that you'll have there for that 2 million ounce target? And then a second question I'll have, what's the long-term plan for Hope Bay? Is that going to be vented out eventually?

Let me talk about Hope Bay, while Grigore sorts through the extension question. At Hope Bay, what we're doing right now is putting it on care and maintenance, working with the local community and the government. And while we have some other potential options, we're not ready to talk about them at this time. What I would say, Mike, is that it's clear that there is gold at Hope Bay. How to recover it in an economic project is something that we believe, over time, could happen, and we'll continue to hold that possibility for us. As Russ said, though, to be precise where we are today, it's not in our development project pipeline. And with that, then we've taken off the amounts on the books so that we have some flexibility going forward, and we'll keep you posted as to what we do. So Grigore?

Thank you, Richard. The current footprint of the mineralization at Long Canyon is somewhere in the range of 800 meters to 1,000 meters. And as you -- as we have already mentioned, we managed to extend the footprint of that mineralization overall by about 25%. So to give you a sense in meters, it's about 450 meters extension to the north. And to the south, actually we are adding again about a few hundred meters. But please keep in mind that we are still early stage here. We have been there for almost a year now, and we really try to confirm the resource first before we were actually able to do any expansion drilling. At the same time, as you are probably aware, we had some permit limitations there in terms of the amount of exploration that we can do in the district, pending the extensions. Now we have secured these permits last year, and we expect this year to show much more district exploration.

And just to build on that, one way to look at the confidence we have in the Hope Bay or -- sorry, in Long Canyon, is that we've actually -- as Guy said, we're getting ready to file our plan of operations. We've moved that up in our time frame by about 3 to 6 months, and that plan of operations is the first step in getting our permit to actually mine there. So we're actually moving very quickly to put this into both operations, while we continue to explore in the district. And what that says is that we're confident that we have enough material through our existing exploration program to go put a plan of operation in place, to get ready to permit that while at the same time, as Grigore said, moving outside, looking at extensions and seeing how far it goes. So I think what you can read into that is that we're pretty, pretty positive about where things stand at Long Canyon.

Patrick, it's Russ. I just wanted to go back and correct. We have the tons -- ore tons and recovery. I'll ask John's group and I'll work with them to get the strip ratios up, and we'll put it on the website so that people can go in there and model it, to the best of our knowledge anyway.

Our next question from Paretosh Misra, Morgan Stanley.

So you mentioned capital discipline as a central part of your strategy. So could putting some sort of maximum limit on CapEx be also considered?

Sorry, I think the question was, would we consider putting a maximum limit on CapEx? And we consider, obviously, our ability to fund ongoing exploration. And capital does come in 2 forms in the sense of new projects, expansion capital and also sustaining capital. And we balance that investment with our expectations around gold price and the balance sheet strength. I'll say that if a project is delivering strong economic returns, we will find a way to fund it. Probably more of an issue for us, quite frankly, in this environment is finding the human capital to build it. So the balance sheet is obviously something we do spend a lot of time looking at. But in this positive environment, we can fund a number of projects. Getting the people and keeping the people to fund and to build those projects is probably the biggest challenge right now.

Understood. And then maybe just one more. How much of this Conga CapEx you will need to spend, should you decide to not proceed with the project this year?

If we don't get the positive nod from the EIA, we have probably $600 million of capital right now that's planned, and I think we'll look at every dollar of that if we don't proceed with this, this year. There will be some ongoing remediation at the site when the dry season comes on us and we'll continue to work through that, but that will be a small portion of that capital. So we'll just keep you apprised as we see, going forward. In the meantime, we'll complete engineering. That's the only thing we really have planned at the moment as we were already demobilizing a lot of the other equipment at the site, preparing to come back when we hear about the EIA, so trying to minimize those costs but be ready to go. As I said, be flexible, be ready to go.

Our next question from Dave Hove, Stifel, Nicolaus. Dave Hove - Stifel, Nicolaus & Co., Inc., Research Division: Richard, just wanted to ask you, recently, we've seen on the news on Ghana that they're starting to review stabilization agreements. And also in Indonesia, that they are -- that in Indonesia that they're going to start to review your contract of work. What sort of impact do you think it would have on Newmont?

Yes, it's a great question. And what I would say is that we have really been on notification in both countries for some time that the governments want to renegotiate. In both countries, we have -- in the one, Ghana, we have a parliamentarily approved, if that's such a word, stabilization agreement. And in the other, Indonesia, we have a contract to work. And we have indicated to both governments that, of course, we'll be flexible within reason. And that while renegotiation from their standpoint might look like higher royalties or higher taxes, that there are other components of a renegotiation, which are things on our side that allow us to do things that we need to do as well. So what I would say is the impact on Newmont at the present time, we could expect that a higher royalty might take place in both of those countries, or taxes. But I would expect that on balance, it will not be material to the company, and that as we find anything out in those -- which have both been on the table for some time and we have not seen any conclusions on either one, so I can't really give you a precise number because we don't have one. But what I can tell you is when we do, we'll let you know. We just want to make sure that people know that in this environment -- and you see it across the world. It's not just Newmont, it's not just Ghana. I think that governments and communities are demanding their fair share of mining projects, particularly in this bull market environment that we've seen over the last couple of years. I think that we have to be responsive. We have to be responsible, but what that means is that we have to be responsible to all stakeholders. It's not just about what communities want or the government wants or what our shareholders need. It's a combination to make sure that we can continue to sustain the business, and that's the way we address these negotiations. We have certain rights, but we also have certain obligations in every one of these countries. Dave Hove - Stifel, Nicolaus & Co., Inc., Research Division: Right. And as a follow-up question on that, you saw that Elang is one of the projects which you talked about obviously [ph] . And with Indonesia planning on banning the exporting of unprocessed ore in 2014, they say, so what are the impacts on your plans with Elang based on that?

That's also a good question. And again, I would suggest to you that my recent discussions with the government of Indonesia, prior discussions, I think Indonesia is trying to ensure, like a lot of countries, that they get the most out of not just the mining but also the mining and beneficiation of the resources owned by the country. How to get the most out of that, I think, is still to come. And while that certainly is a law that the Indonesians have proposed, I think they are still working through, and we're trying to help them work through, what the exact impact of that is. And I would tell you this, that if we go forward with Elang, we're going to have to do so along with the Indonesian government, because we're going to need to get permits. And we will work with them closely to ensure that what we want to do, putting money in the ground for Elang, putting money on top of the ground for processing and equipment, combining that with our Batu Hijau operations -- before we invest significant capital in that kind of project, we are going to ensure that we have the right arrangement that will allow us, the government and the communities to all benefit from our activities going forward. And we don't have all of that in place today, nor would I suggest to you does the government. So what I would say is, while they want to continue to have foreign direct investment in Indonesia -- they have to have that to support their growth, I don't think they have the exact formula. They have pieces of what they want, but they're going to have to work with us to make sure that those pieces comport with what we need. So at this point, what I'd tell you is, we have good exploration potential in front of us. We have some negotiations in front of us, and we'll see how things come out.

Our last question from John Tumazos, Independent Research.

I may be confused by some reports in the press, and forgive me for expressing the concern. I believe it was Mineweb that reported that part of the negotiation for Conga was a commitment that Newmont would guarantee a minimum of $2 billion in tax revenues. Was that report correct? And if you have to guarantee a certain threshold of tax payments before you earn the money, under U.S. accounting, would that show up on commitments and contingencies on the balance sheet?

Let me take that, John. I'll start with the second question, which is we didn't commit to anything, so we're not going to report anything. I don't know what the standard is. But I'm pretty sure if we committed it, we would have to disclose that kind of contingency. But there's no way, if there was such a report, that, that's true. Obviously, we will pay the taxes that are due when they're due, and we'll pay them under the current regulations or how they change over time. But there are no minimums that we would commit to, nor have we committed to anything. So sorry you read that, but it didn't come from us.

If I could follow up. In addition to the NGOs, a particular issue -- and your guys have been working there 20 years, they're well aware, some of the indigenous people in northern Peru don't accept the government in Lima as legitimate. Now they think they were there before Pizarro. So if you encounter these local issues like roadblocks, et cetera, how do you work around the diversity of political opinion in the country?

Well, as I said, John, I think that we're not politicians, but what we are is we have a lot of relations with people in the community. We have been working in that community since really early exploration activities took place in Conga, probably 10 years ago. As a result of that, we do try to stay plugged into what's important to those people. It's an agrarian community. As you point out, there's a lot of history there. I think the roadblocks come from a number of different parameters. They come from politicians. They come from local citizens who are concerned about water and jobs. And I think with respect to each of those categories, we provide what we provide, which is we provide a resource base. We can develop it. We can put people to work. We can provide taxes. And in this case, we can take water, which at the moment is not consumable, and we can turn it into something which is and which is more sustainable over time and which is more predictable, less seasonal. So I think we can provide what the community needs. And how politicians and others accept that is up to them. We can only do what we can do. Well, with that, John, thanks for your questions, and thanks to everybody else for your attendance on the call. We really appreciate your attendance and interest, and thanks for joining us today.

This concludes today's conference. Thank you for your participation. You may disconnect at this time. Again, today's conference has concluded. Please disconnect at this time, and thank you for your participation.