Barrick Gold Corporation
Q3 2013 Earnings Call Transcript

Published:

  • Operator:
    Good afternoon ladies and gentlemen. Welcome to the Randgold Q3 Results International Investor Conference Call. My name is Kate and I am your coordinator for today’s conference. For the duration of this call, you will be on listen-only. (Operator Instructions).
  • Philippe Liétard:
    Thank you and good afternoon, ladies and gentlemen. As managers who have always planned their business for the long-term and as I have highlighted on numerous occasions before, the Randgold team does not live from quarter to quarter. Still it is very satisfying when once in a while our past investments and efforts all align to produce tangible results across the group, as happened during this past quarter. It was a quarter of notable firsts, which Mark is going to detail for you in a minute, but our overall achievement was that at a time when the gold mining industry generally is struggling to come to terms with austerity Randgold has delivered rising grades and improving recoveries as announced and those in turn are giving us increasing production at significantly reduced costs. And as Mark will demonstrate, our plan for the future remains intact with our objectives of continuing to deliver value for the benefits of whole shareholders still very much our commitment. So over to you Mark, thank you. Mark Bristow Thank you, Philippe, and good morning to those signing in from the states and good afternoon to Europe and London and I think we got some callers in from South Africa as well. Just picking up from where Philippe left of. I think the other key point that I like to believe, we underscored today and that is that the results that we presented, first of all may be have surprised the market but as far as management is concerned we were bang on the numbers. And I think the other big takeaway as again for the second quarter in a row, we have been now able to demonstrate that we can fund our own capital programs from operating cash flow. And you would have noticed that we hadn’t drawn on the credit facility as we guided last quarter given the gold [password]. So with that let’s move on to slide show and we move to the third slide. As normal I will start with our sustainability score card. And as you can see we continue to make good progress. And what is the key component of our overall strategy? Tongon and Gounkoto again delivered zero lost-time injuries for the quarter, while Kibali and Loulo had one each. Kibali reached 6 million lost-time injury free hours and that’s an amazing achievement from a team that is dealing with a lot of dynamic as we moved two operations and continue with construction at that project. One of the key first this quarter was that for the first time we achieved our lowest lost-time injury free right as a group for the quarter. Morila and Tongon also passed the environmental ISO 14001 orders, and we were able to conform with the B class application level, that’s an assured level in terms of the global reporting initiative. So that’s all positive as far as our sustainability strategy is concerned. Moving on to the highlights for the quarter, these are the firsts as I mentioned and Phillipe alluded to. Kibali, [pulled] its first gold. Loulo and Gounkoto's production exceeded 160,000 ounces for the first time. And for the first time in quarter long while we achieved a significant production in overall cash cost on the back of better grades, something that we’ve been guiding on for some quarters now. Production as you know is up 19% total cash cost down 17% and was more satisfying as even on a quarter last year this quarter to this quarter, we showed an improvement in type of cash cost. Overall profitability was enhanced by us clearing up the backlog of gold that we’ve reported on in the last few quarters, so all in all a very good quarter. The exciting numbers tell a story and you will see from these numbers everything moving in the right direction. I would also refer everyone to our income statement where you will see that we are really if you look at our income statement and our operating cost, we are well constrained with our operating cost. So not only did we deliver better grades, we had a very good control on our cost and that helped to deliver both better cash cost per ounce as well as a better bottom line revenue. I think, putting it in perspective as well not to have drawn on the facility and got over the peak capital program for the Group this year is a very large capital call, and next year we are getting half that capital commitment and so really at these gold prices, we see ourselves working through the next the next couple of quarters without having to drawn [indiscernible] and shooting up as the capital comes out, and we’ll start holding cash on our balance sheet again. Turning now to the operations and starting with Loulo Gounkoto complex, sterling performance by the complex as a whole production up significantly to a record level as I referred largely on the back of increased trade and a big step up and recovery largely driven by the elimination of [indiscernible] which we’ve talked about at some length last quarter and of course increased grades and the initial benefits of the capital project that we’ve got in place to enhance our profitability that being the cost initiative on the back of heavy fuel, oil, conversion for our base load machines and the expansion and the residence comp for the CIL circuit. Again, if you look at the numbers, I can spend a lot of time on them but what I really summarized it as if you lower same tonnage and produce more gold while cutting costs you deliver better results and this summary of financials really presents the evidence of that. Looking at the Loulo standalone -- sorry just before we move onto Loulo standalone just on the Loulo itself, the Loulo processing plant capital project in this slide what we summarize is the where we’re with the various projects, the [indiscernible] complete now and the [indiscernible] still left to be delivered. The key driver for the continued improvement in recovery is the expansion of the CIL tanks and extra four tanks, the HFO conversion is now done so we should start seeing some benefits on cost coming though and then what’s remaining really is the delivery of the pace backfill for the two underground projects and then piling up on the actual nulling capacity and just making the whole balance around the mold more optimal. On a standalone basis, Loulo mine itself was in line with the complex as a whole, producing again similar throughput, better grades, lower cash cost, significantly low cash cost and a lift in operating profits. That’s borne out by the numbers and I think it’s stratifying to see the progress that management is making with the two underground mines. We still got some way to really deliver the real efficiencies, a big part of that is as we commissioned the backfill plant, we’ll have more access to develop reserves making them available with the backfill and it will slow down our requirement for capital development with that backfill. I think I’m just [pulling] on that -- the key behind the result is our improvement in the whole operation of the underground mines at Loulo and we’ve really restructured our management team to have one management team running both underground mines and we’ve also going down the root of recognizing that these two ore bodies are quite different and they need to be approached in a different way and so we’ve got a better work still to do on getting Gara to be sustainably profitable at a $1000 of gold price that we're really focused on getting that cleaned up ahead of guidance for next year Yalea is a profitable mine at much low gold prices. And just before we move onto Gounkoto and staying with Loulo itself, a theme that we highlighted today is that we’re seeing a number of exciting new exploration options both Brownfield and Greenfield as summarized in this slide and if we move specifically to the Greenfield side, you would recall that we talked about the Gara South target and the Yalea South ridge target last quarter. We’ve been through a rainy period, so the geologists have really been reviewing all the data, bolding models and this slide shows the model that's been developed for the Gara South target. The focus now is to chase this target with another round of trenching with the objective of taking this project to a point where we have a defendable enough target to cast it with drilling into 2014. Likewise with the Yalea Ridge South target, again, we've got a model, it is complex geological target, some very nice grades and the focus now is to try and pull the curtain over to additional pension ahead of progressing with the drill testing again into next year. Moving onto Gounkoto again as with Loulo, the Gounkoto results annualized the complex performance tank throughput, better grades, a significant drop in total cash cost and as you -- we’ve noted on this side we approved and paid out our third dividend during quarter three and in fact last week the Board voted a cost dividends which will be paid out during this quarter of also $25 million. The numbers for the quarter really highlighting the impact of the better grades, a 30% reduction in total cash cost, and really bringing Gounkoto back in line with our feasibility numbers. Gounkoto still as an ore body has grown immensely, and both with potential and complexity and if you recall original feasibility really look to a single plain orebody, and as you can see from this graph, it's a very complex orebody, multiple different ore bodies making up the whole target. And along with the [NZ4] intersection last quarter we’ve now drilled a couple more holes over quarter three, extended the strike of this zone, it’s definitely a new zone. And again we progressed our understanding of the footwall mineralization, also a separate style of mineralization from the main orebody. And the implication of this is that it’s certainly updates or upgrades the quality of the potential underground but also with all these additional zones of mineralization is a real transit we will be able to re-cut the pits. And the big challenge that [indiscernible] and his team are going to be looking at is that trade-off between the continuing with the concept of an open pit in underground and looking at the viability of growing super pits and trying to get a lot of the ore out from open pit rather than a smaller high cost underground mine, which we had and we shared that original prefeasibility. We will update the pre-fe by the end of this year and then we will look at options going forward and where do we take Gounkoto. On the exploration front generally one thing that’s clear is that the Gounkoto orebody is complex with it comes a fresh look at what are all the controls of this mineralization and suddenly all the original target P64 Faraba where we’ve got some resources already defined. We’re looking at it quite differently at the moment. And then you’ve seen in the slide we’ve got a number of new targets that we generated with the reprocessing of all the information over the rainy season. Moving on to Morila, another good quarter for Morila. Really Morila is not in a sense moving towards closure. We’ve got 18 months to go with the push back and processing better ore. Right now, we are processing mineralized waste and still making a profit. The key now is to re-cut our tailings, reprocessing strategy to ensure that, that plan effectively pays for the closure of the mine and that’s the challenge we’ve given management. So that rather bringing the overall loss forward and make sure that we bring this mine to closure. And we’ll be updating the market on that plan when we give you our fresh guidance in five year outlook in January. Numbers speak for themselves. Again, good set of numbers. Even with the processing mineralized waste Morila profitable business, and as I said another 18 months of this to go before we start really moving towards closure. As there was one project that still has -- left us with a challenge through the quarter, it was Tongon mine. Having said that, it’s made a significant number of improvements across the operation the two major achievements for the quarter was the sustained increase in throughput and the improvements in the utilization of grid power something that’s been topical for the last three quarters. And as I pointed out, the one box we haven’t ticked yet is the recovery box, but I’ll share that with you a little bit later. On the numbers, I think the big takeaway is despite the slightly lower grade and the lower recovery for the quarter, the team did exceptionally well to deliver an improvement in total cash cost, driven both by just real focus by management on cost containments and also the flow through of the higher percentage of access to grid power and less utilization of our diesel generating station. Again, as is Loulo our capital projects are all about delivering value for the operations. So, we don't see reason to cut these capital projects that were put in for good reasons to deliver value. We like to return on our capital projects and all these projects are -- and are already delivering returns. Big step for this quarter, we now have the second vibracone installed. That’s the driver with the first two vibracones of the improved throughputs at the operations. We've got two more to go so we’re about bend that throughput down now with the additional crushes. We’ve made good progress in installing the various enhancements around the gravity circuit. The big challenge now is to get this all to work properly. I am talking about that in the next slide, you will see the interaction with the recoveries as we tied in some of the equipment and that’s impacted on recoveries. But in the last few weeks and certainly that’s early part of this quarter, we’ve rarely seen, and not trained in the recoveries and we are encouraged by the fact that the team started to get their head around it and as [indiscernible] has already said to the management team, we’re 30% on our recovery challenges ready operationally, the other 30% is to get the equipment to work. And so all in all, it’s a management issue and we are very comfortable that the management has got their head around that. Moving on to the PowerPoint and just to reinforce the impact of getting back to our feasibility utilization of the grid power. You can see in this graph the red line being changed for kilowatt hours down to where we predicted the power should be. And that’s the direct result of accessing more and more grid power and having to spin our engines less and less. And I must say the work that the mine management have done with the state power utility has really being commendable; a really good partnership. Staying with our results, but looking at the upsides, again this quarter is a quarter of a lot of us delivering visible optionality, still early stage, but the whole thing about exploration is generating new target that have the potential to set our minimum criteria of 3 million ounces that can make 20% return to the long-term $1000 gold price. And we have got some very interesting early stage targets, one a big anomaly that’s come out of Mankono. Something that’s pulled in a steam, I've always felt was a very protective piece of ground, and like a confluence of two big structures, big regional structures. And Tongon look alike target identified in Fapoha. Moving on then, and certainly the star of the show being Kibali, this quarter, having produced the stress power of gold on the 24 of September and we are now well into commercial production on the oxide circuit. For those who are unfamiliar about the process, we have a twin stream processing [ground] at Kibali. The plan is we commissioned the first stream on oxide. The second stream will complete, which is a sulfide stream -- dedicated sulfide steam. We aim to start commissioning that at the end of Q1, once we’ve got enough sulfide ore to feed that circuit but we do have an interim plan where we are going to be starting up the front end of that circuit and utilizing the mold in a closed system to be able to lift the oxide throughput in the short-term until we’re ready to commission the sulfide circuit. Just staying with Kibali, quickly, I think the other key thing and reinforcing Randgold’s real commitment to continuing to look at investing and growing our reserve base. We were able -- as we indicated last quarter, we converted 670,000 ounces of the big increase in resources that we announced last quarter to reserve and just a reminder and that had a $1000 long-term gold price. We’ve also updated our capital spend which is increased by 1% to 1.725 billion from our last update. And for those who might be wanting to follow that observation with the question of how we're doing against that, we’ve spent about two thirds of that capital. We'll finished off with 500 million last year, this year sort of just over 700 million and then we’ve got 14 and 13 and so we finished those phases. On the mining side, everything on track, open pit is very much on track. We’ve got plenty of ore stockpiles ahead of the plant. We have got lots of flexibility on the offside side I think. The declines are well ahead of plan. As we intimated last quarter it looks like we will be intersecting the main ore bodies in the declines early 2015. And we are very pleased to announce that the shops successfully started up on the major sink, so in our commission the winders, the main headgear, and we’re into the main sink, we started sinking at the beginning of this week as you would have seen I think Shaft Sink has put out an announcement today. Just some pictures just to reinforce the pit is, genuine pit looks and feels like a pit and the Malo photograph is the one of the declines and there you can see the headgear was the winder ropes and everything working and it’s pleasing to show you a process implant that looks like a process implant now. Just to reinforce, I’ve already mentioned that a significant improvement addition in reserves are out of the continued upgrading of our knowledge with ongoing controlled drilling and mine design and the underground sink, and we certainly still see further upside as I’ll touch on in a few slides time. One thing I have talked about since the startup of Kibali and that is the major challenges that we faced at the beginning of the project development was the potential task of moving 14 villagers housing more than 21,000 people from a mine side to a new model town, which is now complete and thanks to our sustainability team onsite, it’s really been well managed and certainly is taken up to a new level on how we deal with the communities around our mine. The new town of Kokiza now has more than 4,000 surface full tons, we have about 17 schools of part the program in 11 markets, 10 health centers and 15 places of worship, the biggest being the Catholic Church complex which is now functioning and we’ve got one more big construction to complete the next at Church itself and incidentally it’s going to be one of the largest Catholic churches in that region and certainly the largest when it comes to accommodating worshipers. I’ve touched on this last quarter and that is as we wind down on the capital program and we’ve started doing that, we are going to reduce the employment profile from a peak of 9,000 down to 3,000, a lot of those work will depart back from they came because they came in with contractors, so there is a fair amount of workers at our local, and what we’ve down with our sustainability team as we've looked at alternate employments on the back of encouraging agribusiness and we recently engaged along with the Congolese government, a joint venture group of agri big world-class agribusiness firms, and we’re looking at developing palm oil business integrated with farming and a processing plant and that will move and more than mop up the reduction in employments that we’re forecasting as we wind down the capital program. I touched on it early with the reserve enhancement the upside, the continued upside within the KDD ore body, our ongoing work down dip is definitely showing potential to continue to add to the reserve and likewise recent work has shown not only as down dip but certainly some active potential as well, and we would expect as we go on with our drilling we will be able to continue to add reserves or certainly replace the reserves as we start mining. On the exploration front, the Kibali exploration team has really made excellent progress. We have a number of new targets that are certainly of interest to us. Two of them the Memekazi and the Rambi targets are [indiscernible] targets associated with [indiscernible] information which is very different to the actual safety redeposit and then we’ve got the Massawa target that we talked about last quarter was early stage if you go to the next slide, you’ll see a quick summary of this, this is a very interesting target 350 meters on strike average grade. So far we’re just un-trenching and the next step now is to drill it out. The interesting thing about this target is its relatively small but it makes a big impact on our flexibility, our mining flexibility as we ramp up this operation because it on surface is very good grade or potentially very good grade and it’s near the plant. Same with exploration and just going back to West Africa, quick update on the Massawa project, now we’ve finished the detailed drilling in both the Northern zone and Central zone. Our objective being to really interrogate the ore body and make sure that we understand and get to a point where we know what sort of borehole spacing we need to be able to bank this ore body and we really put a lot of definition in to the orebody from when we first started looking at this project. At the same time, the next queue to drop is to complete the pilot scale pacework where we are waiting for that now that it will commence early in the New Year or run through the first half of next year and then we will be in a position to update our feasibility at the backend of 2014. Just our penultimate slide, I just wanted to reinforce to our shareholders that one of the things that I am absolutely aware of is that the success that you see in our results today is a product of what we’ve done in the past and that our commitment to continue to deliver value for our stakeholders is really driven by the ability to continue to replace the assets we’ve got with similar quality assets. So exploration is absolutely core to our business. It’s exactly the same as what we did in the back 90s -- in the late 90s when in the back of a lower gold price everyone did the same thing they’re doing now, cut capital, cut projects, cut exploration, cut human capital. And we feel that our business is appropriately positioned for $1,000 gold price and what we need to do is the last thing we are going to do is cut back on our exploration initiative. What you see in this is a very well structured portfolio of projects. The top of the value curve being driven largely by ground fields opportunities around these world class assets that we’ve recently developed. The feasibility level is all about our continued understanding and expansion of our knowledge of the Gounkoto and related mineralization and of course [indiscernible]. And then significantly the early stage and advanced targets are all new targets in our portfolio and we’re very excited about this because the whole concept of a successful exploration strategy is to be able to continue to develop quality assets. And even at this stage we still demand our geologists to be able to demonstrate conceptually that these projects have the potential to meet our decimal criteria which for those who are not aware is minimum 3 million ounces and a 20% [indiscernible] as long term gold prices are down. And then finally as a customary, just a performance graph as far as the share price goes. Again I think we outperformed the market on a 12 months basis if we go back ’12 and we -- and the further you go back the more you see how we’ve outperformed the market and I think for me just to finish off the one takeaway that I’ve been fighting for many years now is the ability for a -- now the best measure of profitability is for the -- is the ability of a company to afford its own future. And I think we’ve been able to demonstrate that in the last five couple of quarters and certainly looking ahead we’ve got an exciting horizon ahead of us and we can really forecast out a good five years. And I think the other point I’d make is that we're busy finalizing our detailed budget for 2014 but the first round of budget discussions with our operations is that there is not much materiality between our previous announced five year plan and what we see coming out of operations as a rolling five year plan. And of course the next year will be detailed. And we’ll be giving you a new set of guidance in January but don’t expect anything that’s materially different to the last lot. Really that’s in brief the Randgold story and we’d be delighted to take any question. Around the table I’ve got a couple of heavy we’ve got Paul Harbidge, he is Head of Explorations; Graham who is there to give you any answers on the numbers. And we’ve got [indiscernible] just coming through the office yard London who is from Kibali and so he is here to answer any questions you might have on the capital projects, and of course [indiscernible] is here to pick up any queries on. And we’ll be embarking on a road show starting tomorrow in London and going through Europe next week and we’ll be in the U.S. for the following two weeks into both the states and Canada. So we’ll see you there. Otherwise we’re happy to take questions now.
  • Operator:
    [Operator Instructions] Your first question comes from Patrick from HSBC. Please go ahead.
  • Patrick Chidley:
    Well, I guess I should say congratulations on a great quarter. I think that’s the clear here but great results, but just wanted to get a couple more details on firstly on the tax issue and now the tax dispute. And then can you give us a bit more color on where that’s going and what sort of revolution you expect?
  • Mark Bristow:
    Yes, Patrick, we -- as you know there's a new government in Mali, a properly elected government with a very big mandate, the President got a 75% mandate, the new cabinet is now in place and in fact I've met with the President and Graham and I met with the various key ministers last week, Minister of Finance, Minister of Budgets and Minister of Mines. I think I can summarize, first of all I'll point that the proceeds that we've embarked on is a process that's dealing with an issue that comes from two regimes ago and so it's quite a sensitive issue politically, our view along with government is that when partners have a dispute the best way is to go through a competence jurisdiction to deal with that and the provisions of dispute resolution in our agreements are this arbitration process. At the same time we both have expressed our desire to try and find a solution outside that process but we've started the process and we'll continue to work with government to search for a process. The issue for us is it's an interpretation of our convention by previous regime's tax authority that we don't agree with. So at the end of the day there is certain level of negotiations, but we've never been one to negotiate tax, its either payable under the law or not. And that's the difficulty that we're dealing with. But I must say the maturity at which the government has approached this challenge has been encouraging and we've delivered a full set of documents to the various ministers that would be involved and they might decide to let the competent court a part on this or they might engage us and it's their prerogative and we will certainly stand open to that.
  • Patrick Chidley:
    The situation is that you're actually withholding tax. Is that correct? Mark Bristow There's a number of issues you know around the interpretation, we were exempt from withholding taxes and particularly around repayment of debt, and also the calculation and imputation of that tax was based not only on interest but on capital, and there a number of other little issues that add up over time, so I don’t think it's in anyone's interest to disclose all the detail, but it’s a matter of interpretation and we've taken legal opinion, we feel quite strongly about it, remember we've operated in Mali for 17 years so we have precedents in this process.
  • Patrick Chidley:
    Right, right, right. But when, you say sometime in 2014 this would be, just get a hearing with arbitration. Mark Bristow It's a long process this. We've got plenty of time to come to agreement with the government.
  • Patrick Chidley:
    Okay. Mark Bristow And we're not aggressively pursuing this, it's a process and we're very comfortable with that process.
  • Patrick Chidley:
    Good and then just a little follow up on the Gounkoto exploration result and therefore, what were those, what's your interpretation in terms of -- could this lead to include that mineralization in the bigger pit and then therefore have a deeper pit and then therefore [indiscernible] that was planned previously. Mark Bristow I think the key here is, if you look at the foot hole mineralization which is completely different and new, we always modeled a straight line contact on the foot hole, foot hole and we found another zone and another phase of mineralization that's completely different and has a different orientation to the main ore body. The same as, you know there's still a challenge of how you wrap it P64 and I'll pass you onto Paul because there's a whole lot of handwall and footwall zones that we're busy evaluating and we've got mineralization in the side wall and there's a lot going on.
  • Unidentified company representative:
    At [indiscernible] we got 217 meters of continuous mineralizations [indiscernible] attending the hanging wall of the main zone of mineralization. And the footwall stuff because of the mains and depth to the east everything was drilled east to west and while we intercepted some mineralization in those holes in the footwall, didn't appreciate their orientation until we got into the pits and we see that is actually dipping in the opposite direction. So we turned drill holes around and intercepted some significant mineralization as you see on that slide sort of five and seven grams a turn intersections over 20 and 46 meters, we got [indiscernible] intersections in the footwall which show continuity and we put some initial RC holes and just to follow up that discovery intersection in MZ core and I've got continuity over 100 meters at this stage and drill works are just about to start spinning. So, you know, we've got an updated model which is just being calculated and then as part of our feasibility studies, then Rod's going do a tradeoff certainly between a larger pit and an underground operation. So we could wrap it all up into a larger open pit at the expense of an underground operation but those feasibility studies will tell us which way we'll go.
  • Patrick Chidley:
    Okay, and Z4, you say that's the one where you have the two holes on either side of it and then you [indiscernible] with RC. Mark Bristow Correct, yes.
  • Patrick Chidley:
    And what's it, is that 100 meters or is that… Mark Bristow At the moment it's a 100 meters, in strike length it's still open along strike as well as down depth.
  • Patrick Chidley:
    Right, okay and how far down deep, I mean it doesn't come to surface does it. Mark Bristow Very weakly, but it seems to be getting stronger down depth, we've drilled to about a 100 vertical meters.
  • Patrick Chidley:
    Okay and [indiscernible] which is the target you're most excited about in the group at the moment, as you say is it this one or is it Yalea Ridge South or is it something in Kibali. Mark Bristow Good question, Patrick. I mean on a Greenfield side I like the Mankono target in Ivory Coast where you've got the [indiscernible] the Boundiali [indiscernible] coming together. They've got very favorable geological setting, very favorable structural setting, a magnetic anomaly and we've got a 20 kilometer soil anomaly with several values above a gram per ton and initial to the, some recon, the first sampling gave us over two grams per ton in [indiscernible] volcanic. So the Greenfield targets are very exciting. In a near market and obviously I think there's a lot more potentially [indiscernible] and I think within a two year period we took it from nothing to full feasibility in mining and delivered five million assets so to some extent geologically we're playing catch up and we're identifying all these additional opportunities, so there's certainly, reserve growth potential there, I think you know, Yalea Ridge South and Gara South again could add an open pit flexibility to the [indiscernible] operation and as we get into Kibali and we're certainly seeing, the more we look at it, the more we get the information from both the open pits and the underground development that's going in and that's improving our models and the likes of Memakazi as Mark said in our 100,000 ounces at four-five grams a ton, gives that plant a great deal of flexibility, so I think across the board I'm very comfortable that we've got a great portfolio to work on in 2014.
  • Patrick Chidley:
    Great, okay, we'll look forward to some more great results there, and just one more question, a follow up, in terms of the operations Mark, in Q4 and in 2014 you said that you expect [indiscernible] to continue to increase a little bit. Mark Bristow Yes, and we've got it, on a complex basis there's going to swings and runabouts but overall on a complex basis we see the grades gently increasing all the way out to 2018. We guided --our guidance is -- one of the challenges we're now having is [indiscernible] is the one that has a lot more grades variability but as we go deeper it sort of staples down, we're busy optimizing that, reoptimizing that [indiscernible] at the moment because there's a lot more footwall mineralization and we got to really look to pushback. But overall we know, next quarter, guidance wise we said we’ve got to be still within our guidance at the end of the year on the bottom half of the guidance and a lot of it depends on just how well the Kibali team gets things together, but you just got to do the math and we’re very comfortable with our 560,000 ounce guidance in [indiscernible] Wankota, I said do the math and you can see we're going to have a reasonable quarter next quarter as well.
  • Operator:
    Thank you, your next questions comes [indiscernible]. Please go ahead.
  • Unidentified analyst:
    I have a technical question, it relates to the international financial accounting standards whose breakout you show on, I forget what page, but the change in accounting shows a reduction of working capital or a change in working capital of a $100 million, how does that work, Graham. Mark Bristow Howie, so basically what’s happened is just to summarize is, under the old policy we used to proportionally consolidate, so we used to take a proportional share of Moriler and Kibali's assets, so we're at the fixed assets or cash or whatever, to include them in our balance sheet in the individual line items. Now in terms of the new accounting segments, all of those joint ventures, so that's Kibali, Moriler, some of the exit financing joint ventures that we have, those are all lumped into one line items and they come through in the balance sheet altogether in one line item, in respect of our investment in joint ventures.
  • Unidentified analyst:
    Oh, I see. Mark Bristow So, it's really just shifting it out of trade and other categories and moving it into a new category called investments and joint ventures.
  • Unidentified analyst:
    I know it was shifting, because you can't hide the money, but I wondered where it went. Mark Bristow So that's really it, it's you know lots of people have their views about this new standard, certainly I don’t think it does anyone any good, because you now have all this information lumped into one line. So you can't actually see how it's made up, but unfortunately this is something that's been thrust upon us, and so we've had to adjust. As you can see in our quarterly report, we actually do a reconciliation between the old accounted policy and the new accounted policy, you can actually see line by line where the differences are. Unidentified Analyst Yes I just saw the working capital change, and I wondered. Mark Bristow And now we will continue to summary -- just to present summary financials as we've always done where we split after project. Unidentified Analyst Good and I'll say that the confusion with the international financial reporting standards just means more footnotes and higher bills for the accountants. Let me add to that, your return on capital for the 12 months, it’s about 12% after tax. At near the bottom of the pricing cycle, we don’t know exactly where it is, but it can't be that far -- or too many mines will go out of business. 12% is extremely commendable. Nice job.
  • Operator:
    [Operator Instructions] There are no more questions registered at this time. Mark Bristow Well, that leaves me to thank everyone for phoning in -- I take it that you're satisfied with the answers that have been given. And again we are always available if you feel compelled to call us and ask specific questions and well certainly looking at the list on the dial-in sheet that we'll be seeing most of you over the next couple of weeks anyway. So look forward to doing that and ciao.
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