Newmont Corporation (NEM) Q2 2013 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Welcome to the Goldcorp Inc. 2013 Second Quarter Conference Call for Thursday, July 25, 2013. Please be advised this conference call is being recorded. I would now like to turn the meeting over to Mr. Jeff Wilhoit, Vice President, Investor Relations of Goldcorp. Please go ahead, sir.

Thank you, Dave, and welcome everyone to the Goldcorp second quarter conference call. Among the senior management in the room with me today are Chuck Jeannes, President and Chief Executive Officer; Lindsay Hall, Chief Financial Officer; George Burns, Chief Operating Officer; and Russell Ball, Executive Vice President, Capital Management. For those of you participating on the webcast, we’ve included a number of slides to support this afternoon’s discussion. These slides are available on our website at www.goldcorp.com. As a reminder, we will be discussing forward-looking information that involves unique risks concerning the business, operations, and financial performance and condition of Goldcorp. Forward-looking statements include, but are not limited to, statements with respect to future metal prices, the estimation of mineral reserves and resources, the timing and amount of estimated future production, cost of production, capital expenditures, and cost and timing of the development of new deposits. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from those expressed or implied by such forward-looking statements. Accordingly, you should not place undue reliance on forward-looking statements. With that, I will now turn the call over to Chuck Jeannes.

Thanks, Jeff, and thanks, everyone, for joining us today. We are coming to you from Mexico City, where we just concluded our quarterly board meetings. We were also pleased to visit the key stakeholders and government representatives during our time here. In our experience, this week only reinforces what we’ve long believed that Mexico is one of the best mining jurisdictions in the world. We’re fortunate to have some of our most important operations here and we look forward to a continuation of these important relationships for many years to come. I’m also pleased to introduce to you the newest member of our executive team and someone many of you know well from his time as a peer company, Russell Ball, our new Executive Vice President of Capital Management. A big part of Goldcorp’s future is its growth projects and Russell’s primary focus is ensuring that these projects are not only delivered successfully, but also with an appropriate focus on financial discipline. With a forecast, $2.6 billion capital spend this year, Russell brings valuable skills and a lot of experience that have already begun to pay dividends. In addition to our financial results, we’ll also review some of the capital spending and expense reductions that we’ve implemented in response to recent volatility in metals prices. It’s important to point out that our underlying business remains very strong. We’re taking these actions to safeguard our financial strength and to sustain our success in any conceivable market environment. Our operations remained sound and our growth projects continue to progress. So the company remains well positioned for both short and long-term success, and this strong position has allowed us to maintain our dividend without change. So moving on to the results, gold production increased in the second quarter inline with our expectations driven…

Thanks, Chuck. Gold production in the first quarter totaled 640,000 ounces with solid production across the mine portfolio that keeps us on track for 2013 guidance. Starting with Red Lake, production totaled 122,500 ounces at a total cash cost of $523 per ounce. Production decreased as expected compared to the first quarter as favorable mining sequence in the first quarter provided higher grades in tonnage in the High Grade Zone as compared to the second quarter. High Grade Zone de-stressing in the 46-47 level is progressing as planned and mining in this area is included in the mine plan for the fourth quarter with minimal ounces expected. Exploration drilling continued on the NXT zone and results today have been better than expected. The zone remains open vertically into the west, and several drills are targeting this zone, both from the 4199 exploration drift and from existing infrastructure at higher levels in the mine. The key to mining successfully at Red Lake has always been maintaining flexibility and the NXT demonstrates good potential to enhance operational flexibility. At Peñasquito, the second quarter gold production totaled 88,100 ounces and by-product cash costs of $920 per ounce. As expected, production increased from the first quarter, as we began mining in a higher grade portion of the pit, which increased our average grade from 0.31 gram per ton at 0.43 gram per ton. We expect the grade to continue to increase throughout the year to approximately 0.6 gram per ton in the fourth quarter. Mill throughput in the quarter averaged approximately 105,000 tons per day and due to peak water availability, June averaged almost 120,000 tons per day. We continue to expect production of between 360,000 ounces to 400,000 ounces for the year. We are aggressively targeting efficiency improvements and cost reductions at Peñasquito.…

Thanks, George, and good morning or good afternoon, everyone. It’s truly a pleasure and honor to be speaking with you today as part of the Goldcorp team. I look forward to help me deliver the significant growth profile that we ahead of us, one which I believe to be the best in the gold business. It’s been a busy two months in my new role. I have been very impressed with the culture, the people and the level of energy and excitement within the company. I am making it a priority to meet with as many of the projects site and regional leaders as I can, to get their perspectives on the challenges and opportunities we face in addition to visiting the operations and projects to get a first hand understanding of the assets. I’m also spending time developing a framework to provide a more rigorous and disciplined capital allocation process whereby projects and mines will be required to compete for capital not just across the internal portfolio of opportunities, but also against what is available to M&A. As part of this effort, we are working on enhancing our stage grade process to enable a better understanding of risk adjusted returns, so we can allocate capital more effectively. Obviously, in light of the recent decline in the gold price and the inherent capital intensive nature of this business, the need for increased financial discipline is more important than ever. Turning to slide 16, I had the pleasure of visiting Cerro Negro in Argentina last week, and was impressed with the progress the team is making. Underground oil production from the Eureka mine commenced at the beginning of the quarter and initial ore development commenced at the Mariana Norte and Mariana Central mines in June. Ore is being stockpiled on the…

Thanks, Russel. As you just heard from George and Russell, production was up and significant progress was made at our project this quarter. Before I get into the financial details from a balance sheet management perspective, we are tracking to our financial plan for the year as the loss revenue is due to pricing this quarter as the last step by the delay in our capital spending. Right now we plan to be at the start of the year, so financially we have weathered the decline in metals prices extremely well. As for the quarter, our inability to capture the higher gold and silver prices at the beginning of the quarter was a disappointment. For the quarter, almost half of our gold and silver was sold in June, which coincided with the steep decline in prices and resulted in a significant difference between our realized prices and the average stock prices for the quarter. We estimate revenues and after sales in pricing amounted to approximately $0.06 per share. Also, affecting our earnings with inventory on hand at Red Lake and PV at the end of the second quarter, which we estimate amounted to some $0.02 per share. Lastly, we had a negative provisional pricing adjustments in the amount $0.02 per share Pueblo Viejo and Alumbrera. So when you add up the average sales price realized, the inventory on hand and the negative provisional pricing impact that accounted for some $0.10 per share in earnings this quarter. The most significant non-cash item affecting our earnings was a $1.96 billion or $2.41 per share non-cash impairment expense, a $1.83 billion related principally to the decline in the market value in-situ exploration potential at the Peñasquito mine and $131 million related to our investment at Cerro Negro, excuse me, Cerro Blanco. The combination…

Thank you, Mr. Hall. Questions will now be taken from the telephone lines. (Operator Instructions) Our first question is from Alec Kodatsky with CIBC. Your line is now open. Please go ahead. Alec Kodatsky – CIBC World Markets: Great, thanks for taking the call. I just had a couple of questions on the operating side. First, with respect to Peñasquito highlighting that it operated above the 120,000 tonnes per day last month. Is that really a function of increased from water availability or is there some connection to some of the water reduction efforts as well?

Actually, a combination of the two. As planned we implemented additional wells in our existing field and so there is an increased supply of water. Additionally, we are looking at conservation within the operation earning slightly higher density in the floatation circuit and improve operating constrains out of the tailings pond themselves and ailing improved recovery. So it’s a combination of those. The one thing I would highlight the higher water availability that we saw in June was a result of a number of wells coming on stream, however, once and so our expectation, we’ll continue to see the decay in flow rates out of each of the individual wells and we’re still comfortable with our 105,000 ton a day expectation for the remainder of the year. Alec Kodatsky – CIBC World Markets: Okay. And just wondering, maybe probably another question for you George, just if you could give a bit of color around the silver recovery issues at PV and some of the stuffs being taken there?

: Alec Kodatsky – CIBC World Markets: Okay. So it’s an equipment shift in, to view it’s still view the chemistry of the process is effective?

Yeah. There’s three things that impacts silver recoveries, one is limestone additional or PH, two is the mineralogy of the silver in the third temperature and the temperatures are only issue and again, we’ve got a design retrofit that will be tested in the third quarter and optimistically we’re going to get it resolved. Alec Kodatsky – CIBC World Markets: Okay. Thanks very much.

Thank you. The next question is from Stephen Walker with RBC Capital Markets. Please go ahead. Stephen Walker – RBC Capital Markets: Thank very much, operator. First question is for Lindsay. Lindsay, I noticed that you’ve got again dividends from associates in the quarter from Alumbrera. What is your expectations or has there could be any indication on when you can expect dividends coming from Pueblo Viejo.

No, we haven’t had a discussion with [Barrick] on Pueblo Viejo. I think Steven talked on behalf of (inaudible) and we’ll get the MOU signed first. and then we’ll decide what we’ll do with cash and everything, but you’d have to talk to [Barrick] to get more clarification on that. Stephen Walker – RBC Capital Markets: Okay, thank you for that. and just on the Alumbrera amounts that are reported, is that cash that’s actually repatriated back to head office or is that, will that be the dividend that would be sitting in country, in Argentina?

No, I thought we’re getting it out of the country, if your question to Steven, we’re actually slowing dividends out of the country from Alumbrera.

Okay. is there a reasonable exchange rate, is that at the normal exchange rate that we would see posted, I guess on the North American markets. That’s something to be checked, I think that the official exchange rate, Steven. Stephen Walker – RBC Capital Markets: Okay great thank you. George maybe just a follow-up question on the NXT zone of Red Lake, when do you expect to be developing Éléonore, I know you’ve got the development in place to do the detailed drilling, but can you give us a sense of when you could be developing Éléonore and when do you could be reporting presumably reserves at some point?

So we’ll be touching the next ore body in the second half of this year. and in terms of production expectations, we expect to have some reserves at the end of the year, and some production in our 2014 production plan. Stephen Walker – RBC Capital Markets: Okay, thanks for that, much for that and just maybe a question for Russell. Russell, in the prior conference call and Gary Goldberg made a comment that he thought for new mine the 12% hurdle rate would be an appropriate level. I’m just curious what you think an appropriate hurdle rate for precious metals, a gold mining company should be and given the jurisdictions in North and South America?

The interesting question is the mining. I think obviously, you do want to depend on the risking and the jurisdiction by jurisdiction. I would think that there are a number of factors whether it’s a single company versus a portfolio where you can diversify some of that risk. My personal belief is that 12 is a little high for the gold business, but I’ll ask Lindsay to chip in to give perspective, he got the best trends.

Usually, what we do feel is when we start looking at assets competition for capitals usually is about a 15% unlevered return and then start looking at the risks around that 15%. But we started, they deferred screening our opportunities to invest the capital. Stephen Walker – RBC Capital Markets: Great. Thank you very much for that and congratulations on vending machine.

Thank you. I appreciate it.

Thank you. The next question is from John Bridges with JPMorgan. Please go ahead. John Bridges – JPMorgan: Good morning, everybody.

Hi, John. John Bridges – JPMorgan: My head is still spinning for your presentation, a lot of numbers there. I’m just thinking with respect to IFRS, is this a new age of upgrades and downgrades in the valuation of assets. Can we expect to see IFRS affecting a lot of other Canadian companies as we come through?

Well, John, it’s Lindsay. It’s maybe new to – followed by you and me under IFRS that you can in turn asset write it down, but in the future for the fact that circumstances changing those indicators of testing and in fact, the indicator is saying if the value of the asset goes up, you can actually write it up, which is kind of new under IFRS plus. John Bridges – JPMorgan: Right. So that’s making you a little bit more amenable to tailoring the balance sheet to current valuation?

I don’t think so, John. Not it’s like more than, I don’t think so. That’s not the case at all, it’s just applying the standard and I guess what I’d say there hasn’t been a lot of companies asking that have actually written up assets currently, but if in fact, you had sustained really quite high gold prices and you saw that into the future, that would start getting companies under IFRS having to look at the value of our assets, they’ve been impaired before. John Bridges – JPMorgan: Right, interesting. How you’re thinking about contingencies in this current environment with uncertain gold prices? You made some cuts, but would you guys further as the gold prices back or do you think you’ve done enough?

And John, this is Chuck. If you think back to that slide, we put up this quarter and I put it up last quarter as well, I kind of talked about the range of options that we would look at various price scenarios. And what we’ve announced today is simply that we follow that plan and because we’re down below $1,400 gold price environment we’ve looked at cuts of SG&A, and exploration and some deferral of non-critical capital spending. And I just want to highlight again, that doesn’t impact our near-term production. And so what we would do in a lower price environment has also indicated on that slide. We get down into the $1,200 and below price environment for a period. We have to start looking at whether some of the high cost operations should be sustained at that level and as I said last quarter, the high cost operations are well aware of that and I guarantee you they are working very hard to reinvent themselves so that they can look at different configuration and be free cash flow positive at $1,200. So that's what we would do. We would look at it, but I suspect at the same time, George and his teams are going to be looking very hard at how to make those sites profitable in a lower price environment. John Bridges – JPMorgan: Okay.

But that result as you might expect might be some margin allowances that come out of the plan with a focus more on the higher quality ounces of those assets. John Bridges – JPMorgan: All right. I’d like to echo Steve’s comments, welcoming Russell and pleased to you find a new best gold company.

Thanks, John. I appreciative it. John Bridges – JPMorgan: Yes. Bye.

Thank you. The next question is from Tony Lesiak with Macquarie. Please go ahead. Tony Lesiak – Macquarie Capital Markets.: Hey. Good morning, everyone. Question on costs, looking at by-product cash cost guidance for 2013 was unchanged and that’s despite the fact that you used some materially lower price assumptions for let say silver, copper, and if you look at the sensitivity table that you provided in the presentation and I mean you’d think that your cost structure should up about a $80 a ounce. Where is the offset going to be coming from?

Well, maybe I can just really quick, Tony, and to say that you recall we did give you a range, right? So we had some room within the range that we guided at the beginning of the year. And then secondly, based on our current price environment, we’re comfortable that we’re going to meet that guidance that we provided. Certainly, if we see a material move down in those by-product metal prices between now and the end of the year that could change things.

Yeah, I’ll just add. We’ve got a range in both our production and our cash costs and our production is coming in solid and we are feeling some pressure from lower silver prices, but we’re still within the guidance. Tony Lesiak – Macquarie Capital Markets.: Okay. So there’s no specific adds where you might have some more flexibility to improve grades or lower costs in the near-term.

Well, as planned, we’ve got higher grades at Peñasquito production increases and Peñasquito and Alumbrera, but those were as planned.

Yeah just to make clear, we’re not making any short-term changes to try to meet that numbers just as the mine plants continue as said at the beginning of the year? Tony Lesiak – Macquarie Capital Markets.: Okay. And maybe, just on Peñasquito, can you talk to your comfort level of let’s say analysts utilizing long-term 130,000 ton a day throughput rate, starting from 2015 on?

Sure. With the announcements of our water availability in our project, our confidence of having adequate water for 130,000 tonnes a day is very good. And if you look at our announcement today, we did a 120,000 ton in June. So, that, I think can give everybody confidence that the ramp up is continuing and will continue. Now averaging 130,000 ton a day consistently, we’ve got further pushing of that plants that needs to occur and until it happens, we can expect this further debottlenecking to occur. The only bottleneck we currently have for the production we’ve pushed thus far on the mine has been the primary crusher. And we’ve made some good progress in debottlenecking that reducing time or the pressure is not there, reducing the amount of plugging and bridging that happens within the pressure, and that’s happened by improved blasting. So, I’m comfortable we are going to achieve designed throughput at Peñasquito and the win will depend on getting the water available and pushing the circuit. Tony Lesiak – Macquarie Capital Markets.: Okay, thanks, Russ. And then finally, just on the timing of your results and met test from Camino?

It’s Russ. Yeah, we are very early on the met program goes out through the third quarter of next year, so I would like to lock in some before the end of next year. We are busy recruiting for a study there, I think it’s really drive Camino Rojo. We feel it’s a significant opportunity in a very perspective bill. We are continuing to fund the project and we are quietly optimistic that this will become an ex-Goldcorp mine in Mexico, but it is very early to look for results and I’ll update towards the end of next year. Tony Lesiak – Macquarie Capital Markets.: Okay. But you won’t be giving us an update on drilling or expiration sitting there?

Yeah, Tony, this is Chuck. We will give you the normal update on drilling at year end and an updated resource for the project. And it’s our resource that we hand over them to the projects group and in combination with all the network and the other things that are going on, we intend to start a free feasibility study next year. And I’ll just say that we’re going on a lot of different funds here. We are continuing to drill in full speed, doing the metallurgical testing as a person when you are testing. We are working on lot of supplies which, of course, is a key issue in that part of Mexico. We are working on land acquisition in the Eagle agreements, so there is a lot of things happening, and this will hopefully accommodate in the kick off of met study sometime next year. Tony Lesiak – Macquarie Capital Markets.: Great. Thanks so much.

Thanks.

Thank you. The next question is from David Haughton with BMO. Please go ahead. David Haughton – BMO Capital Markets: Yes, hi, and thank you, everybody for the update. Just following on from Tony’s question about the ramp up to 130,000 tonnes there, George, I heard what you were saying, is that reasonable to expect that you could be at that point of run rate, maybe 2016 sort of time, if you do get the pipeline in, by middle of next year?

That’s not an unreasonable expectation. I mean, we are and as I said we hit the 120,000 tonnes in June. So my comfort level has improved relative to a quarter ago, and we are focused on other things we can do with the primary crusher to be able to sustain the 130,000. So I would expect we can beat that date, but I just caution everybody that let us hit the water, let us continue to ramp up, and I’m optimistic we’ll be there. David Haughton – BMO Capital Markets: All right. And with that in mind and I know that you are looking at the additional studies to see what you can do for potentially thickening or dissecting portion of the tails, is that just as a safety backup or do you see that is required for longer-term sustainability at that higher rate?

So I mean we are only looking at thickening, now we eliminated through test work, the idea of filter tailings. So we are focused entirely now from a reduction of water consumption to the thickener option. And really it fits in with an overall strategy costs, what’s our lowest cost option, and then knowing that we’ve got the potential to increase our production logistic with Camino Rojo and water is going to be a key asset. So any reduced water requirements of Peñasquito enables us to have additional water for the Camino Rojo project. So the second, it looks to make really good sense economically, it makes sense from a – protecting the water resource and our expansion plans in the district. David Haughton – BMO Capital Markets: So is this Northern Well Field also or likely source for Camino?

Well, we’re going 60 kilometers to the north to tie into this Northern Well Field. Camino Rojo has roughly the same distance to the south. David Haughton – BMO Capital Markets: Okay.

So we can tie infrastructure and that’s what the feasibility study indicates the best option, but obviously we’re looking for water closer to Camino Rojo, it’s the best option. David Haughton – BMO Capital Markets: All right. Now, just switching to another part of America, thinking about Cerro Negro, what you’re saying about a little bit slower on the connection of the power and possibly looking at a little bit of slippage on the deliver day maybe. What should we be thinking about for the capital spend remaining for this year and into next year, if we’re thinking about sliding money around a bit?

Maybe, let me just say first David, and I’ll pass it to Russell then. I guess I remind you that nothing has changed from the last quarter. We told you then that the late delivery of that pyramid was putting our first goal in late 2013 at risk, although that’s still what we’re shooting for. And then secondly, to the extent that we do defer some capital from 2013 into 2014, which is what we announced today, obviously the amount to be spent in 2014 will go up from what we would have planned previously. And maybe, Russell, turn it over to you for the details.

Yeah, David, as far as spend, we spent just under $300 million for the first six months, and we expect to spend about 750 for the year or so an additional 450 in the second half. David Haughton – BMO Capital Markets: And next year what sort of number you are looking at there around 350, 400ish kind of number?

Let me get back to you, David. We’re actually going through an evaluation as Chuck mentioned on deferring non-critical, and we’re looking at putting some of the fine grinding capital potential into 2013, so we’re going through the analysis right now. We'll be able to give you at least a better indication on the third quarter call and then once finalize the budget in early December. David Haughton – BMO Capital Markets: All right. Question now to Éléonore, I guess on a similar time here, you’ve got development of the Upper mine underway and that’s going to get you to 3.5 tonnes a day ultimately doubling with Lower mine 2017 is your kind of time. With the conservation of capital and sliding things through time, can you see a scenario where that Lower mine could be pushed out in time if needed?

Well, just to be clear that is not the scenario of today. All we’ve done right now is push some non-critical path surface infrastructure into 2015 given that we’re in a low revenue environment and this conserving capital. We have not done anything to impact the long-term plan. And frankly, we don’t intend to in this environment, we’re quite comfortable with our liquidity and with the plan there at Éléonore. Again, if things changed, if the gold price dropped and stayed there for a while, those would be the kinds of things you would have to think about deferring the development as a Lower mine would be one of things on the list.

And David to give you an indication of capital, we’re about $284 million for the first six months and we expect to be around $650 million for the full year. David Haughton – BMO Capital Markets: Okay. Gotcha, all right. Thank you very much for that.

Thanks, David.

Thank you. The next question is from Greg Barnes with TD Securities. Your line is now open. Please go ahead. Greg Barnes – TD Newcrest Securities: Thank you, operator. Question back to Peñasquito, in the financial – one of the financial statements you talk about running the impairment test on the assets of various costs per tonne and you used a 50 per tonne of gold mills. It seemed relatively high versus the carbon rate, and I would expect them to come down if you are increasing the throughput to 130,000 tonnes. Is the 850,000 just a conservative number or is that your expectation going forward?

Yes, George, that is a conservative number. Our current costs are better than that and our expectation through our continuous improvement processes is to get better. Greg Barnes – TD Newcrest Securities: Okay. So it’s more like 750 would be an appropriate number or 700 tonne?

Yeah, Greg, also and again, this is George, for the impairment testing that the 750 up would give or take, we added some – we believe that down the line that in fact, we will be adding some milling costs for maybe in order to get deeper in the ore body for perhaps some copper. So that is the cost and because remember when we look at impairment test we are looking at the whole weight of the mine and when we put in the average cost and say those are the parameters we use for valuing the net present value of the mine life, and we are looking over a long period of time for the impairment test. So it might start out, it will start out at a much lower rate in 853 and then build up as we start to know some of those additional impact. Copper is the bottom around the ore body, so okay, that we use for impairment analysis. But it’s certainly much higher than current run rate we anticipate for the next period of time.

Our current costs are in that 725, 775 per tonne range, and again, we’re looking at opportunities to bring that number down. Greg Barnes – TD Newcrest Securities: Right, okay, good. Secondly, on PV, I’m just wondering on the status of the autoclave, I believe one of them was going to come up in the second half of 2013. I’m just wondering where we are in the run rates on each of the autoclaves at this point?

So yeah, we’ve got three or the four autoclave retrofits completed before nearly complete, and all those retrofit designs are operating as planned. We have had issues with delivery of the modified valves which are the big valves in the autoclave circuit, and that’s caused some issues on the ramp up in the second quarter. But essentially, we’re on track with the retrofits and again, comfortable with the guidance we’ve put out for Pueblo Viejo and expecting to get the full production in the second half for design. Greg Barnes – TD Newcrest Securities: Okay, good. Thanks, George.

Thank you. The next question is from Farooq Hamed with Barclays. Please go ahead. Farooq Hamed – Barclays Capital Canada, Inc.: Thanks for taking my question. My first question is related to Peñasquito. So in your MD&A, when you talk about the impairment charge, you took, you said that is the result of the institute exploration ounces, but you also mentioned that’s in combination with changes of the life of mine plant. So can you give us some details on what you meant there by changes to the life of mine plant?

Yeah, all we did Farooq, it’s Lindsay, all we did for changes in the life of mine plant is that as we announced today, we put in the northern water. So we found the water, so there is capital George talk about, but attaching that, and there is a proposed mining tax in Mexico that we took a position on that and took that into the life of mine plant, although the two primary changes to what I call the operating mine. Farooq Hamed – Barclays Capital Canada, Inc.: Okay, so there wasn’t any, let’s call them uneconomic ounces that were removed from the current mine plant.

None of that, but we also get use a short-term lower short-term price stack on that life of mine plan. Farooq Hamed – Barclays Capital Canada, Inc.: Okay and then maybe just switching gears a little bit, talking about the Cochenour solution there, so that’s expected the study for the Cochenour solution expected to be done by mid-2014, given that if it’s viable it can reduce your water requirements by nearly 40% power potentially up to 40%, if it’s viable how quickly could you implement that solution after the study is done.

So the current tailing is down that we’re depositing in, that was part of the initial construction. It’s got 4.5 years of life left and it employs the use of cyclones for separating sands and fines, and Cochenour won’t work in that configuration, so the studies are to look at Cochenour in the new tailings down that would be implemented in four to five years. And again we are confident, we know that the cost of the Cochenour, we’re confident about the water that we’ll save and confident that it’s going to be an important part of the next phase of the tailings designed at Peñasquito, but it’s implementation is four, five years out. Farooq Hamed – Barclays Capital Canada, Inc.: Okay that’s helpful thank you. And then maybe one last question, just about related to your slide on managing the volatile gold prices, so you know you have a point there that the gold prices about 1200 you would look at reconfiguring and shutting down the higher cost mines, one question there would be how long would the gold price have to be sustained under that level before you started making those decisions.

Yeah there is no defined timeframe, it really depends on a wide variety of factors that we would take into consideration to give us the best estimate of the future price rate. It's not just how long it stays there. It’s what the macroeconomic environment is in the world that gives us our best ability to estimate what the future might be. So I can’t say that it's a quarter or two quarters and it also depends largely on the mine itself. If they're able to make adjustments so that they are not bleeding free cash, then we certainly have more time to be able to work through that process.

I might just add, from particularly open pits and lower metal prices, we run pit designs at that lower metal price and come up with modified ultimate pit and modified mine sequence. So at any one of the operations, if we’re pressured on the lower metal price we’re going to be working our opportunities to optimize mine plants and that will improve the cash flow. So those are levers we would pull in. The underground’s are similar that you – there are lot of great stokes that require development and when you look at the all in cost of mining those ounces, some of them will drop off at lower prices and obviously because they are lower grade they're going to have small impact on our production profile, but will help in operation the more cash flow positive and lower metal price. So there is number of levers that we can pull and again our teams are focused on looking at those alternatives as we speak. Farooq Hamed – Barclays Capital Canada, Inc.: Okay, great thank you.

Thank you. The next question is from Patrick Chidley with HSBC. Your line is now open sir. Please go ahead. Patrick Chidley – HSBC Securities: Thanks. Hi, everybody.

Hi, Patrick. Patrick Chidley – HSBC Securities: Just a couple of legal questions and maybe Chuck can address these. First, down in Santa Cruz, maybe you can just stretch out a bit more detail about this proposed or actually now enacted 1% tax and whether or not you feel this is possibility being grandfathered on the previous system or if everybody has to pay this and if not what are the ways in which you think you can fight this?

Well, Patrick, I certainly, we believe and I think I can fairly speak for the other operators and the developers in Santa Cruz that this is not a tax that’s supportable under the law of Argentina and so we will be approaching or considering our options in terms of a legal challenge to that tax. Now, it has been enacted, but in a very broad based form and there is a lot of work that needs to be done to actually implement it, and during now and then, this one will be considering those legal options. Patrick Chidley – HSBC Securities: Okay.

I should say that there is a connection between the fact that we’ve shutdown exploration at Cerro Negro in the tax. I mean, there are several factors involved and certainly we are looking to defer in our necessary spending throughout the organization and we have many, many years, 9 years of solid reserve life already laid down in front of us at Cerro Negro. But if we’re going to be taxed on the value of our reserves, it doesn’t really make a lot of sense to add years to that reserve profile going forward. Patrick Chidley – HSBC Securities: Right, right. And as I understand, they’re proposing to charge 1% of the revenue potential, institute value of your reserves each year, is that right?

That’s the reported system, yes. Patrick Chidley – HSBC Securities: Exactly, okay. And then just a small one here, that wasn’t a legal challenge or an issue at one of the Ejido’s at Peñasquito. I think last quarter, I just wanted to know more – outcome of that was come to an agreement and solved the problem or if it’s still an issue?

It’s still outstanding. I can say that we’ve got a lot of folks working on it from a lot of different directions, and I feel confident that we’ll get to a situation where we can negotiate a fair settlement with the Ejido and that’s what we’re working towards, but there is legal matters pending and a lot of work going on, on that right now. Patrick Chidley – HSBC Securities: Okay. Thanks, Chuck.

Thank you. The next question is from Brian Yu with Citigroup. Please go ahead. Brian Yu – Citigroup: Hi, thanks, good morning. My first question is on Peñasquito, I’m not sure if you guys have shared what the July milling rate is looking like? And then also with the expected decay and well output for the remainder of the year if you guys had an expectation what that’s going to look like and when it will stabilize?

I can just give you a broad description and we’ve got additional wells planned, and our expectation for the second half is to have adequate water to average 105,000 tonnes a day. So there is going to be a movement from month-to-month depending on when wells come on stream and that decrease in water coming out of existing Well Field. And in terms of trying to predict month-by-month throughput, I’m not going to do that. I’ll just tell you, I’m confident we’re getting an average around 105,000 tonnes a day in the second half and expect it will be a bit lumpy month-to-month and its all about the water that’s available and wells that come on stream and this decay in flow rates.

And just to clarify, Brian, that is well within our guidance for gold production that we’ve given you for the year. So we’re comfortable in reaffirming that guidance. Brian Yu – Citigroup: Okay. And how is July been working?

July is on track with that. Brian Yu – Citigroup: Okay. And then this is a (inaudible) question, but with that 20% write-down in the Peñasquito carrying by, should we be modeling a proportionate drop in the DD&A going forward?

There will be a drop in the DD&A going forward, but not 20% drop. I am actually, I have to get back to you Brian, but as you know most of the impairment went against exploration potential. This doesn’t affect appreciation. On an allocation basis, we have to allocate some to the plant. But we don’t have an immediate impact this year, but in the future it might, it will. Brian Yu – Citigroup: Okay, guys. And just switching gears a little bit, on Cerro Negro, I heard Russell said, that you sent deferrals as for some fine grinding. Could you elaborate on other pieces of it that are being deferred, and if that has any impact on expected ramp of the production or cost?

Yeah Brian, just to go back, it was the fine crushing circuit as we know areas 200. We have the equipment, but we are looking at running without that just to see the ramp up and conserving capital and then we’ll install it if and when we need it. As far as the other reductions, things like admin, warehouse, a maintenance shop somewhere in the order of $30 million to $50 million, we are still working through that analysis with the team, but it’s what I consider non-discretionary, and converting initial construction facilities into more permanent facilities and saving capital that way too. Brian Yu – Citigroup: Got it, the last one I got is with the sales and how we are half, nearly half it’s all in the month of June, is that normal or is there something else that occurred in the quarter.

No, that’s actually pretty normal as you might expect, we kind of clean-up the circuits beyond each quarter, and then get a slow start to the year, and as the growth company and with our production growing through the year, and it also grows the quarter, so that tends to put most of the production later in the quarter, and just to anticipate a question, we do not do any kind of speculating or holding back inter-quarter hedging or anything like that, we sell the gold as it comes out. Brian Yu – Citigroup: Okay thank you.

Thank you. The next question is from Anita Soni with Credit Suisse Please go ahead. Anita Soni – Credit Suisse: Hi good morning guys. My question is with regard to the NPI that’s being implemented at PV, how do you anticipate treating that once it comes into effect, will it come into all in sustaining cost number or...

You are very hard to hear Anita. Anita Soni – Credit Suisse: I’m sorry about that. So on the PV NPI once that comes into effect, and you finalize that, will that be, how do you intend on treating that, would that come into the all in costs or excluded from that.

I think I won’t, I will say my opinion but my good friend of mine, will actually determine that part, I don’t think it will be an all in sustaining costs. The net profits, interest taxes kind of the form of royalty to me, but you better average. Anita Soni – Credit Suisse: Yeah, that’s why it’s up debate right, so I was a bit curious.

That’s all right, I can debate with tomorrow. Anita Soni – Credit Suisse: Okay, you could follow-on other side of the fence to get to (inaudible). And then just in terms of Cerro Negro, would it be safe to assume that you might be more inclined to take write-down if you have been required to, given the new taxation regime in Santa Cruz?

We’ll actually, Anita, when we, as you know we got to look at all our properties and we actually even though obviously as you’ve heard from Chuck, we were disputing that tax lead for account through that tax in, and even then, we had lost the head room at Cerro Negro. The Cerro Negro impairment really revolves around our assumption that there will be a devaluation in the peso, but that ore body is so large and high graded even when we threw the tax in for modelling assumption and it was just for modelling assumptions, still had headroom, lots of headroom. Anita Soni – Credit Suisse: And two last questions, the first question was with regard to those production costs and leverages you provided, production costs are essentially just the operating cost right before the sustaining costs in your, so when you say something has to increase by 56%, we’re talking about the operating costs having to increase by 56%?

Maybe, I’m confused, Anita, just to say your question a bit, Anita, whether you are you talking about the impairment or just the actual operating costs? Anita Soni – Credit Suisse: The impairments, the disclosure that provided, I think it’s on page five of the MD&A.

Yeah. Anita Soni – Credit Suisse: And there is, like as an example, Red Lake staying 52% increase.

Yes, yeah. That was – sorry, I’ll shut up for a second and let you ask your question. Anita Soni – Credit Suisse: Sorry, and so then when you’re saying the production costs, you’re talking about the production costs there is not the all-in sustaining costs?

No, you are absolutely, correct, Anita. It’s just – we’re trying to give a hand on margin. How that… Anita Soni – Credit Suisse: Yeah, and the last question also, because Tony, sort of said that something about the, sorry, guidance now as sort of reflecting higher cost assumptions. I guess, it was my understanding these are two separate issues that’s impairment charge doesn’t necessarily mean that you are using a lower gold price assumption for your byproduct credit guidance for this year, is that the case or?

Well, yeah, I mean we are telling you that we believe our byproduct costs and our all end sustaining costs will meet the guidance that provided you at the beginning of the year. And obviously, there is risk in that if the byproduct metal prices go down very far. But where we are today, we’re still comfortable with that guidance. If the byproduct prices dropped meaningfully below where we are today, that would be a risk. Anita Soni – Credit Suisse: All right. Thank you very much.

Thanks, Soni.

Thank you. The next question is from Jorge Beristain with Deutsche Bank. Please go ahead. Jorge Beristain – Deutsche Bank: Good morning, guys. I guess my question is maybe for Lindsay, could you specifically tell us what is the assumed Mexican resource tax that you’ve now baked in?

Just a 5% profit tax on EBITDA, I’m sorry. Jorge Beristain – Deutsche Bank: 5% EBITDA tax?

Yeah. Jorge Beristain – Deutsche Bank: Got it. And…

Sorry I just want to interrupt. That hasn’t been determined for impairment testing. This is a number that was included in a law that was passed in one house of the Congress whether that exactly is what gets passed or when it gets passed we don’t know, but for impairment testing being conservative that’s what they put in. I wouldn’t want you to assume from that. We believe that 5% EBITDA tax is necessarily eminent. Jorge Beristain – Deutsche Bank: Got it. And Lindsay, maybe if I could just prove a little more deeply on this write-down, can you just clarify, what was specifically the catalyst event? I know that you talk about lower commodity prices, but was it just playing in simply that, because typically these write-downs have been handled at the fourth quarter under IFRS as we’ve seen. So I just wanted to understand if there was anything more to it, if it was really the combination of the tax issue in Mexico and some other things? And then secondly, would there be anything that could lead to potential write-downs like this and other mines based on what the stress testing that you’ve already done or we’ve done with these kind of write-downs?

Well, first question is that we had the indicators we saw in the quarter was the commodity price decline plus we saw that the market cap of the company had dropped below our book value. So that gave us positive to the indicators that we had to test for impairments. So those are primarily two things. If I drove to something that would add color to that, certainly, what happened to June 30 is the price of the in-situ value of exploration properties, certainly, we’re much far below 25% to 35% below what we had this exploration potential on the balance sheet. So actually that’s why we stepped in indicators of impairment, took the impairment test, ran it and took the charge under IFRS, there’s nothing in the rule as far as we go forward, we wait for the fourth quarter to take charges. That’s when you have indicators of impairment you have to test. Then to your second question, we’ve tested all our assets and we’ve given lots of disclosures for headrooms of the other operations that we’ve tested for impairments, so it’s in the MD&A both in, as Anita said on just the previous question, even gave you some ideas on the cost structure of the various entities, to really say to the market where our headroom is with our other properties and capital projects. Jorge Beristain – Deutsche Bank: Got it. Thanks very much.

Thank you. There are no further questions registered at this time. Mr. Jeannes, you may proceed, sir.

Okay, thank you very much, and thanks, everyone, for joining us today. I got to say, I’ve been quite gratified by the support and confidence of many of our shareholders during what’s been a pretty tough period in the gold market given this price volatility. And I think they continue to believe in our consistent long-term strategy. We have seen a partial rebound in the price of gold and other metals here recently, and I believe that the factors that are supported gold strong performance over the last decade will continue to feel a healthy market for our product. Yeah, I think, I said this last quarter, but I want to say it again. It has been said that you should never let a serious crisis go to waste, and I think this is important, because while this downturn has been painful, the changes that we are making in response to that, I think we’ll resolve in Goldcorp being an even stronger company going forward that is very well positioned for long-term success. So we look forward to taking on these challenges that we face and turn them into opportunities and certainly look forward to updating all of you in the third quarter on our progress. Thanks very much.

Thank you. The conference call has now ended. Please disconnect your lines at this time. Thank you for your participation.