Newmont Corporation
Q4 2013 Earnings Call Transcript

Published: 21 Feb 2014

[Operator:]

Good morning, and welcome to the Newmont Mining fourth quarter and full year 2013 earnings conference call. [Operator instructions.] I would now like to turn the call over to Kirsten Benefiel, senior director of investor relations. Thank you, you may begin.

[Kirsten Benefiel:]

Thank you, operator, and good morning, everyone. Welcome to Newmont's fourth quarter and full year 2013 earnings conference call. Joining us on the call today are Gary Goldberg, president and chief executive officer; Laurie Brlas, chief financial officer; Chris Robison, executive vice president of operations and projects; and Randy Engel, executive vice president of strategic development. They and other members of our executive team will be available to answer questions at the end of our call. Turning to slide two, I’d like to refer you to our cautionary statement. We will be discussing forward-looking information, which is subject to a number of risks. More information is included in our SEC filings, which can be found on our website at newmont.com. Now, please turn to page three, and I will turn the call over to Gary.

[Gary Goldberg:]

Thanks, Kirsten, and thanks, everyone for joining us this morning. I welcome this opportunity to highlight the strong results our team delivered in 2013, for maximizing production and exceeding cost reduction targets, to bringing profitable new projects online and divesting noncore assets. I also want to help you understand Newmont’s potential in the years ahead. My goal is to clearly explain our stable production profile and the substantial cost reductions we are committed to achieving, and give you more specifics on what we have done to scrutinize and optimize our project pipeline. Finally, I will delineate the specific steps we have taken to improve our financial flexibility by modifying our dividend policy and securing commitments to restructure our debt. Let me make our capital allocation priorities crystal clear

[Laurie Brlas:]

Thanks, Gary, and thanks, everyone, for joining us this morning. I’ll begin on slide 14. As you can see from the results we reported last night, the actions we are taking to optimize cost are clearly helping to offset the effects of an approximately 16% reduction in gold prices this past year. Comparing 2013 with 2012, we delivered revenue of $8.3 billion, down 16%, due to lower commodity prices. On a GAAP basis, we reported a net loss from continuing operations of $2.8 billion as strong operating performance was offset by $4.4 billion in asset writedowns. Adjusted net income was nearly $700 million, or $1.40 per share, down from $3.71 per share in 2012, primarily due to the reduced gold price. Cash flow from operations was very strong, at $1.6 billion for the year. This is clear evidence of the outstanding efforts of our operators to manage cost in the current challenging price environment. Turning to slide 15, we see the impact of asset impairments and NRV adjustments on our net income for the year. I would like to walk you through the reconciliation to adjusted net income. Full year earnings per share on a GAAP basis was a loss of $4.94. We experienced a total of $6.88, net of taxes and minority interest, for impairments and revaluations. These writedowns were largely attributable to reductions in assumed long term gold prices. For accounting impairment testing at year-end, we assumed $1,300 per ounce of gold and $3 per pound of copper. $5.01 net of tax is related to impairments of property, plant, mine development, and other long term assets, primarily at Boddington in Australia and Long Canyon in Nevada. The same factors that impacted these operating assets also affected our deferred tax assets. As a result, we recorded a valuation allowance with an impact of $1.07 to earnings per share. When calculating adjusted net income, we also exclude the gain on sale of assets as that is nonoperating as well. Thus we ended the year with adjusted net income of $1.40 per share. We also had a charge of $1.11 related to the revaluation of stockpiles and ore on leach pads. Approximately $0.61 of this is attributable to gold, and the remaining $0.50 to copper. Adjusted net income would have been $2.51 if you add the stockpile revaluations to it as well. Moving on to slide 16, the fourth quarter was a particularly strong quarter for us, with all-in sustaining costs of $1,032 per ounce, down 14% over the prior year. Our gold CAS was $755 per ounce for the quarter, and it fell at the low end of our 2013 full year outlook. And I do want to point out that these figures include the impacts of the NRV adjustments I mentioned. Realized copper pricing for the fourth quarter of $2.99 was impacted by higher than expected treatment and refining charges at Boddington. Copper CAS of $4.02 was negatively impacted by the NRV adjustments. For the 2013 fiscal year, all-in sustaining costs were down 6%, or approximately $73 per ounce, from 2012. Realized gold and copper price for the fiscal year were down 16% and 14% respectively, and CAS was up 12% and 89% respectively. The all-in sustaining costs in CAS numbers include the noncash impacts of NRV adjustments, which make it challenging to see the significant improvement in our costs. Turning to slide 17, we can see the impact of the NRVs on our reported costs applicable to sales more clearly. On a consolidated basis, you can see that our CAS for 2013 excluding NRV adjustments was in line with 2012 at $675, demonstrating that our commitment to reducing costs and implementing efficiency improvements is taking hold. Total NRV adjustments included in CAS were $347 million for the quarter and $958 million for the full year. Across our regions, we saw CAS either improving significantly or holding the line over the prior year. When Chris discusses operating results later, he will provide additional detail on how our regions delivered on our objectives and he will focus on CAS excluding the NRV adjustments. Now moving on to slide 18, as Gary mentioned, our capital allocation strategy is focused on three points. First, improving financial flexibility, second, enhancing our portfolio to focus on those assets with the greatest risk-reward profile, and third, returning cash to our shareholders. First, improving our financial flexibility remains a top priority for us, and we’ll continue to take actions to ensure we improve our balance sheet position. The outstanding focus in 2013 shows in the numbers and the actions. We ended 2013 with $1.6 billion in cash and no borrowings on our $3 billion revolving credit facility. Even more important, we generated $1.6 billion in cash from continuing operations for the year, which includes $400 million in the fourth quarter, the quarter with the lowest realized gold price of the year. You may remember that three months ago I was very pleased to report our first quarter of positive free cash flow in two years. Well, I’m even more pleased to report that we did it again in the fourth quarter. With two straight quarters of positive free cash flow behind us, we clearly have turned things around. We’re cognizant of our debt requirements as well, and are focused on reducing debt and taking other actions to improve our financial flexibility. Yesterday we announced our success in obtaining commitments for a term loan of $575 million, which I’ll discuss shortly. We also look to rationalize nonstrategic assets and interest as a source of additional financial flexibility. In 2013, we divested approximately $600 million in noncore assets. All of these actions have served to significantly improve our financial flexibility. The second element of our capital allocation policy is to take actions that will enhance our portfolio. Our assets remain the lifeblood of our company, and we will continue to leverage the inherent strength of our current portfolio and exploration strategy to drive production over the long term. And I’d like to note that while we believe it’s prudent as a company to evaluate acquisition prospects, we would only do so if such opportunities are accretive to cash flow in the near term. Thirdly, while we remain focused on strengthening our balance sheet and looking at ways to enhance our portfolio, we are also committed to returning capital to shareholders through our gold-linked dividend that has been adjusted to the current realities of the industry. And I’ll review our stated policy in a minute. Moving on to slide 19, as Gary mentioned earlier, one of our core priorities is maintaining an investment grade balance sheet. Over the last two days, we announced two actions that clearly support that priority. First, we secured commitments from a group of lenders for a five-year term loan of $575 million. The proceeds are expected to be used to repay the $575 million of convertible debt maturing in July 2014. The term loan is structured to facilitate early repayment without penalty from free cash flow, as we expect to delever over the five-year period. This slide illustrates our revised maturities after considering the term loan, which positions us very well. We have also instituted a revised dividend policy that allows for sustainable returns to our shareholders, without compromising our ability to invest organically or maintain financial flexibility. We will continue to pay a dividend at a gold price above $1,200 per ounce, with significant leverage for shareholders as the price of gold rises. You can see the increasing dividend on this slide. In summary, we are taking the right steps to strengthen our balance sheet through additional asset divestitures, a reduction in the dividend payout schedule, and most importantly, maintaining an ongoing focus on generating cash through continued cost and efficiency improvements. And I’ll now turn the call over to Chris, who will provide you with a regional update for 2013 compared with 2012.

[Chris Robison:]

Thanks, Laurie, and good morning to everyone. Moving on to slide 21, I’m very pleased with the performance our regions delivered in 2013. In Nevada, fourth quarter gold production increased 12% from the prior year quarter, due to higher tons and grade at Mill 6, higher grade at the Juniper Mill, higher grades at Phoenix, as well as higher leach production at Carlin North Area and Emigrant. This were partially offset by lower royalties paid due to lower metal prices and higher inventory builds. Full year production over the prior year was flat and, exclusive of impairments, CAS was $642 per ounce for the year. The regions delivered exceptionally well on the all-in sustaining cost front, reducing all-in costs by 8% to $964 per ounce. On the project side, we’re very pleased the Phoenix copper leach project achieved commercial production on time and on budget in the fourth quarter. This project will add 9,000 tons of copper production each year. Moving south, on slide 22, Yanacocha’s fourth quarter attributable gold production decreased 21% from the prior year quarter, mainly due to planned lower gold leach production resulting from lower grades. Yanacocha’s CAS per ounce increased 35% from the prior year quarter, due to leach pad writedowns and lower production. Excluding impairments, South America’s CAS for the year was $546 per ounce, slightly up from $505 per ounce prior year. South America production is down 20% over prior year, as planned. However, despite reductions in production, the region achieved a 6% improvement over prior year all-in sustaining costs coming in at $1,032 per ounce. Turning to slide 23, our Africa region delivered strong production and a reduction of 19% in all-in sustaining costs over 2012 and the successful startup of the Akyem operation. Ahafo fourth quarter attributable gold production increased 32% from the prior year quarter, due to higher ore grade and throughput. Ahafo’s CAS per ounce decreased 27% from the prior year quarter due to lower milling costs and higher production. Production from the region increased 25% over prior year, due to the successful ramp up at Akyem in the fourth quarter, delivering 129,000 ounces, well above our expectations of approximately 50,000 to 100,000 ounces for the year. I commend the team for delivering this project on time and under budget. Moving to Indonesia, on slide 24, Indonesia production was down and costs up over prior year, as expected, as the phase six stripping campaign remains underway. We anticipate reaching the higher grade phase six ore in Q4 of this year. Fourth quarter attributable gold and copper production decreased 14% and increased 38% respectively from the prior year quarter due to lower ore grade from gold and higher ore grade from copper, as well as higher copper metal recovery. CAS increased 51% per ounce, and 57% per pound, respectively, due to stockpile writedowns. Excluding stockpile writedowns, gold CAS was $927 per ounce for the full year. Finally, we move to Australia and New Zealand, on slide 25. I recently visited all of our Australian and New Zealand operations, and was extremely pleased with their efforts to reduce cost and improve productivity. This is particularly evident in our Tanami and Waihi operations. Fourth quarter attributable gold production increased 5% from the prior year quarter, primarily as a result of higher ore grades and higher throughput. Other Australia and New Zealand CAS per ounce decreased 23% from the prior year quarter due to lower operating costs and higher production at Tanami and KCGM. Full year gold production for the region is up 7% and all-in sustaining costs are down 2% over prior year, due to improved operating efficiencies at Tanami and Waihi. I will now turn the call back to Gary to discuss our outlook and the optionality our portfolio offers.

[Gary Goldberg:]

Thank you, Chris. If you could turn to slide 27, Newmont delivered in 2013, and we are committed to meeting or exceeding the targets we are presenting for 2014 through 2016. We expect gold production to rise to between 4.8 million and 5.2 million ounces in 2015 and 2016. This would represent an increase of about 5% compared to 2014. In North America, production is expected to rise from 1.6 million to 1.9 million ounces, mostly due to better grades and lower stripping ratios at Carlin and Twin Creeks, which represent an additional 300,000 ounces. We will also benefit from new production of between 100,000 and 150,000 ounces per year, starting in late 2015, as the turf vent shaft is completed. We expect Australia and New Zealand production to remain stable at 1.7 million ounces, with portfolio improvements offsetting lower production at [unintelligible] as that mine matures. In Africa, production is also expected to remain stable in the 700,000 to 800,000 ounce range. Akyem will deliver 400,000 ounces per year, and Ahafo will rebase to between 300,000 and 400,000 ounces in 2015 due to increased stripping as we execute laybacks. In South America, we are evaluating options to boost production through laybacks and optimizing our approach to developing the Conga project. In the meantime, we are projecting that production will decline by about 200,000 ounces as our deposit matures. Finally, we are projecting gold production increases of about 200,000 ounces per year in Indonesia as we reach primary ore at the end of 2014. This represents about 6% to 7% of our overall gold production in 2015 and 2016. Turning to our copper production outlook on slide 28, we also expect Batu Hijau copper production to grow by 50% to more than 100,000 tons in 2015. Copper production at Phoenix and Boddington is expected to remain stable at about 50,000 tons annually over this same period. Turning to our cost outlook, on slide 29, we surpassed our cost and efficiency improvement targets in 2013, and will continue our strong trajectory over the next three years. Our outlook is for all-in sustaining cost reductions of approximately $600 million to $700 million, which will offset the effects of inflation and rising input costs and keep our cost per ounce stable. We are confident that we can accomplish this, but we’re not entirely satisfied, and we’ll continue to look for ways to boost productivity and efficiency. Let’s turn to slide 30 to look at what this means for gold costs. Gold CAS is expected to remain stable from 2014 through 2016, with improvements offsetting a 3% compound annual inflation rate. About two-thirds of our savings are expected to come from operating cost and efficiency improvements, while the remaining third will come from better throughput and recovery. North American CAS is expected to benefit from higher grades, lower stripping ratios, and improved plant performance. In South America, CAS will benefit from processing plant and facility consolidation that will help offset the impact of mining older deposits. In Africa, we will optimize the mine fleet and achieve other productivity improvements that will help offset the impact of lower grades and higher stripping ratios at Ahafo. In Australia and New Zealand, efficiency improvements will focus on increasing mill throughput and improving maintenance and dispatch practices. Finally, the ramp up of phase six mining is expected to significantly improve both gold and copper CAS at Batu Hijau in 2015 and 2016. Taking a brief look at our copper costs, as we turn to slide 31, our overall cost to produce copper will rise with production volume increases. More importantly, our unit costs will be reduced by more than 60% from 2014 to 2016, primarily due to efficiencies of scale in Indonesia. Our outlook also calls for reduced sustaining capital expenditures in the years ahead. Turning to slide 31, as I clarified earlier, we are taking a reasoned approach to these reductions. After three decades in the mining industry, I can promise you that drastically cutting sustaining capital to make the numbers look good in the short term ends up costing significantly more in the long term. This page shows the total capital spend, which is predominantly sustaining capital. Development spending is down this year, as we’ve completed Akyem and Phoenix, copper leach, and reduced our spend at Conga. Our sustaining capital spend is expected to increase by about $250 million in 2014 compared to 2013, due to increased spend on deferred stripping at Carlin and Twin Creeks, mining development at Tanami, and tailings expansions at Gold Quarry and [unintelligible]. That said, our total capital spend will decline by 30% from 2014 to 2016, exclusive of further investment opportunities. We’ve had great success in improving project economics, at Merian in particular, and we will reconsider our development spend for the right opportunity. The ultimate outcome of cost and capital discipline is a healthy business. Let’s move on to the final slide and look at where we’re taking Newmont in the medium term. Our vision for Newmont is to lead the gold sector in creating value for shareholders. As we have demonstrated over the last half hour, we are on track to maximize value in the short term and to capture the benefits of economic recovery and demand growth in the longer term. We have set a clear path to improve the business by building a portfolio of longer life, lower cost assets, by delivering steady production, by making cost and capital discipline part of our DNA, by maintaining an investment grade balance sheet and financial flexibility, and by replenishing our growth pipeline. Thank you for your time, and I’d be happy to field your questions now.

[Operator:]

[Operator instructions.] Patrick Chidley from HSBC, your line is open.

[Patrick Chidley:]

Just a question on your projects, really. Maybe you could supply us with a little bit more detail and information on what the plan is at Merian, for example. Is it going to be a leach or a mill? What kind of strip ratio should we assume given the grade that you’ve got there?

[Gary Goldberg:]

Merian’s actually near surface deposit. It would be run through the typical leach process after milling. And we’re expecting between 400,000 and 500,000 ounces a year production over the first five years. The ore in the first part, that sits up near the surface, is very soft ore, so you actually get very good throughput. And coupled with the grade that you saw, that’s what helps to provide really good front end production over the first couple of years. Capital on that, in terms of what would be remaining to spend, and as we’ve announced here, we now own 100% of that project, the government has the potential to take up 25% under its rights with our mineral agreement, but the capital overall, remaining to spend, is between $800 million and $1 billion.

[Patrick Chidley:]

And if you made the decision in the second quarter or coming up soon, then would you start construction this year? Is that how it is, or is there more work to be done?

[Gary Goldberg:]

Yes, that would be what we’d be doing. It would take about two years from the time we make that decision to the time we get to first production. And I’ve been down there, and obviously had a chance to visit our competitors’ operation at [unintelligible] to take a look and very similar sorts of conditions early on in the mine life.

[Patrick Chidley:]

And I noticed you added [unintelligible], 9.5 million ounces, to the resource statement, for the first time. Is that something that’s developing into more of a project for you now?

[Gary Goldberg:]

At this stage, we’ve added it into resource, but we’re not doing a whole lot of work on it, given some of the other things going on in Indonesia.

[Operator:]

Brian Yu, your line is open.

[Brian Yu:]

My question is more on Yanacocha. It seems like from your guidance there’s a nice 1% bump in production for 2015. If you could give us maybe a little bit more detail on what’s happening there?

[Gary Goldberg:]

Actually, Yanacocha, we expect fairly steady production this year and next year, and then see the decline in 2016, our attributable share down about 100,000 ounces, 200,000 overall. The team there’s been looking at different ways to be able to extend the mine life as we continue to progress the work on our [water first] strategy at Conga.

[Brian Yu:]

I might have misread it. It seems like your cash costs are dropping nicely in 2015. If it’s not production, can you elaborate on what’s driving the cost reductions?

[Gary Goldberg:]

I might ask Chris Robison to comment briefly.

[Chris Robison:]

While we’ve already seen some good cost reductions in the Yanacocha, we continue to focus there through our Full Potential project, and we see significantly more costs coming out in ’15. So that would be the main driver. Ounces are pretty flat.

[Brian Yu:]

But then it comes back out? In 2016, costs are getting pretty close to a thousand?

[Gary Goldberg:]

In 2016, because we’re not giving production out beyond ’16 with this, we’ve got some stripping we’re doing in ’16 to do laybacks to provide production out in ’17 and ’18.

[Operator:]

Our next question comes from John Bridges from JPMorgan.

[John Bridges:]

I know you can’t say much in Indonesia, but what’s changed in the last three months? And then there was a story yesterday that some operators there had got export permits, but I understand that you didn’t get any. What should we take from that?

[Gary Goldberg:]

I think a couple of things. In terms of what’s changed in January, January 11, the government did come out and extend basically what they had in place for a potential export ban from 2014 to 2017. I met last month at the World Economic Forum with a couple of different ministers of Indonesia to talk about the situation and talk about potential paths to a solution. I think what I’ve seen happen here in the last day or two, you saw, I think it was five different groups that were granted export license. One of those is the Gresik smelter, which we ship copper to, and that provides for them to be able to ship basically the refinery slimes or the anode slimes out to get processed and operate. The rest you saw were, I think, pretty much just nickel and nickel matte producers that received their licenses. We’ve not achieved that, and neither has our other competitor there in Indonesia, as we look at the situation. We are in discussions about what we might do that fits within their overall objectives and what we need, and what we believe we’re supported in with our contract to work. I think the other thing you’ve got going on, we’ve moved, over the last three months, closer to the parliamentary elections, which are in April, and then a presidential election in September. And what you do have going on is the sort of things that happen around an election that can cause some uncertainty. So we’re working through that at the same time.

[John Bridges:]

And actually, they’re quite cash-strapped in that country, I believe.

[Gary Goldberg:]

I’m with you in terms of I believe having our operations running and contributing to the local economies where we operate, for employees, the regional government, national government, is an important part and contribution to Indonesia.

[John Bridges:]

And then you said that you weren’t going to issue equity to pay down debt, but you’ve got the Merian project, you’ve got a decision on Long Canyon coming up. I’m just wondering the extent to which you feel you can finance that growth capital within the production and cash flow profile you just detailed.

[Gary Goldberg:]

As you look at where prices are today in particular, we’re very comfortable that Merian at this stage can be done within the cash flows we’re forecasting over the next year or two. And we’ll have to assess Long Canyon. And that’s why what we haven’t done is built in any of these projects until they go through and get board approval. But part of that process will be looking at what our capital is that’s available. And in the meantime, as we’ve emphasized, we’re still looking at other assets that may not be core, and that we might be able to sell.

[Operator:]

Our next question comes from Adam Graf from Cowen.

[Adam Graf:]

Just circling back to Indonesia, how much of Batu Hijau’s planned 2014 production can be placed at Gresik?

[Gary Goldberg:]

At this stage, if our current plans are in place, it would be about half of our production for the year. We’re looking at some contingency plans that would allow us to actually take our production back through the year, if it was needed, and then Gresik could handle up to 90% of our production.

[Adam Graf:]

And then as a follow up to that, it seems to me that the 2009 mining law and the current export tax and ban violates your contract of work, and if nothing is going to happen politically to change that in the near term, and you guys go to international arbitration, how will that unfold?

[Gary Goldberg:]

At this stage, we’re trying to avoid taking it to arbitration and have the discussions that we believe we can have with the government to resolve the situation. So if we’re required to go to arbitration, which I’d put kind of towards the last resort from my standpoint, then we go through a process of filing and actually we’re then into a longer process several months to a year to work ourselves through an arbitration process, but at the same time, continuing to work to resolve the issue. But at this stage, that’s not at the forefront of our approach. Our focus is on having discussions with government officials to resolve the issue for the benefit of Indonesia and obviously for the benefit of our employees and our shareholders.

[Adam Graf:]

And just finally, the Batu Hijau expansion that had been in the works, I’m assuming that’s off the table until things are clarified?

[Gary Goldberg:]

Yeah, what we have at the end of this year, we’d be getting back into primary ore for phase six, and then we’re into that for the next two to three years. The expansion you’re referring to, phase seven, we’d begin stripping for that towards the end of that 2016 timeframe. At this stage, plans to move forward with phase seven are pending resolving this issue.

[Adam Graf:]

I guess I was also referring to the mill expansion, to take total throughput at Batu Hijau to 175,000 tons a day.

[Gary Goldberg:]

At this stage of the mine life at Batu Hijau, we’re not pursuing a mill expansion.

[Operator:]

Our next question comes from Jorge Beristain from Deutsche Bank.

[Jorge Beristain:]

I was wondering if you could disclose the terms of the recent $575 million bank loan that you obtained, and if you could just contrast that with, perhaps, why you chose to do that instead of a bond.

[Laurie Brlas:]

The terms are very similar to our existing revolver. Very minimal covenant package. An example of the confidence our banks have in us. I think that’s a very positive statement. And really we selected the term loan because of the prepayment without penalty, and the goal to delever over the coming five years. With the bond, we would not have that type of a luxury. So it was for that reason.

[Jorge Beristain:]

And what kind of interest rate are you paying?

[Laurie Brlas:]

LIBOR plus 1.5.

[Jorge Beristain:]

And maybe a second question, just conceptually, you did mention that your intention is to delever. Rough numbers, we’re looking at you guys earning anywhere between $200 and $300 an ounce of free cash flow, just based on the sort of all-in sustaining cost concept. But then your interest expense could be around $300 million to $350 million a year. Just wondering what your projected tax assumptions are in 2014. Do you expect to pay any cash taxes?

[Laurie Brlas:]

Yeah, we will be paying some cash tax, but it will be less than we paid in 2013.

[Jorge Beristain:]

And then if you made a decision on Merian or any of these other growth projects, would the door be open there to raise equity for those projects, bring in a partner? How would you intend to fund some of those big cash calls if your free cash flow does not support it? Or would you simply just delay the project?

[Gary Goldberg:]

In the case of Merian, and given where current conditions are, obviously it’s got to be taken forward and receive board approval, but we see Merian as one that we can cover within our current cash flows. As we look out to 2015 and the decisions that we’ll have in front of us there, we’ll have to assess the situation at that stage.

[Operator:]

We do have a question from Garrett Nelson from BB&T Capital Markets.

[Garrett Nelson:]

I’m wondering what the guidance assumes in terms of production from new mines. Are the primary drivers basically higher ore grades at Batu Hijau and in Nevada, in addition to the turf vent shaft production in late 2015?

[Gary Goldberg:]

I think what we’ve included in here, we don’t have, for instance, the Merian project that I talked about, so that would add production, if we went forward with it in 2016. We don’t have Long Canyon, we don’t have the things I talked about Ahafo, the mill expansion, or the underground. Those are all projects that, once they come forward, we make a decision and would include them. Then we’d include those in the statistics and make the changes to our forecast. The only new project or major development project we’ve got going on that’s showing up in the production numbers is the turf vent shaft, which comes online towards the end of 2014. The rest of the swings you see are around primary grade, as I mentioned, at Twin Creeks and Carlin, as that increases in 2015 and then 2016.

[Garrett Nelson:]

And then based on these guidance ranges, in current gold prices, it looks like your free cash flow generation could be significant over the next few years. Is your first priority the Merian and Long Canyon projects? Or is it debt paydown? If your intention is deleveraging, perhaps targeting the 2017 or 2019 maturities, are you targeting any specific leverage ratios?

[Gary Goldberg:]

Lots of questions in there. I think the key, though, comes back to what the priorities are. I think we’ll look at development opportunities that generate free cash flow and look attractive. I think paying down debt does fit in there, and then tying back to our commitment to shareholders to return a portion of our free cash flow back to shareholders, as we’ve demonstrated in our modified gold price linked dividend would be where our priority and targets are.

[Garrett Nelson:]

Do you have any specific leverage ratios in mind?

[Laurie Brlas:]

We don’t really have a specific leverage ratio in mind. Continuing to work with the rating agencies and focus on the investment grade balance sheet, that’s been our focus, and continuing to manage the debt. And as Gary said, it’s really a balance of all those activities. I wouldn’t suggest we put all of it into debt paydown, but a portion of it would be very good.

[Operator:]

At this time, there are no further questions. I would now like to turn the call back over to Gary Goldberg.

[Gary Goldberg:]

Thank you, operator, and thank you, everyone, for joining. There are three points that I’d like you to take away from today’s presentation. We delivered nearly $1 billion in costs and efficiency improvements in 2013, and we have plans in place to deliver another $600 million to $700 million. Second, we delivered two projects on time and on budget at Akyem and Phoenix copper leach, and we optimized our exploration and project pipeline. We will only invest in the most prospective development options, such as Merian. Third, we’ve taken decisive action to maintain financial flexibility with changes to our dividend policy and we’ll apply strong rigor to our capital allocation process. Thank you very much for joining today.