Newmont Corporation
Q3 2014 Earnings Call Transcript

Published:

  • Operator:
    Good morning, and welcome to the Newmont Mining Third Quarter Earnings Conference Call. All lines will be on a listen-only mode until we open for questions and answers. Today's conference is being recorded. If you have any objections, please disconnect at this time. I'd now like to turn the conference over to Meredith Bandy, Vice President, Investor Relations. Thank you. You may begin. Meredith Bandy Thank you, operator, and good morning everyone. Welcome to Newmont's third quarter 2014 earnings conference call. With us in the room today are Gary Goldberg, our President and Chief Executive Officer; Laurie Brlas, Chief Financial Officer; and other members of our executive team will be available to answer questions at the end of the call. Turning to Slide 2, I'd like to refer you to our cautionary statement. We'll 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 Web site at newmont.com. And now, I'll turn it over to Gary. Gary Goldberg Thank you, Meredith, and thank you all for joining us this morning. I appreciate the opportunity to share the latest from Newmont. We delivered strong results in the third quarter, including net income of $210 million or $0.42 per share, operating cash flow of $328 million, and stable gold production. For 2014, we expect our cost to be at the lower end of guidance, and we remain on track to meet our current outlook for production. Strong performance starts with safe and efficient operations. Turning to Slide 4; over the past two years we've reduced our total injury rates by more than 35%. Our ultimate goal is to prevent all injuries and illnesses at Newmont, and to make the communities where we operate safer too. For example, we continue to support the fight against Ebola in Western Africa. We're partnering with a private sector group and Project C.U.R.E. to get supplies to frontline medical workers. We're also working with government and health providers in Ghana to raise awareness and preparedness. While only a few countries are affected, we see this as a global issue, and I'm proud that our employees in Denver have donated to the Red Cross to help putting into this pandemic. We're supporting their efforts by double matching their contributions. I'm also proud of our teams' performance in delivering on our commitments. Let me turn you to Slide 5; highlights for the quarter fall into three main areas. The first is improving our underlying business. We continue to find ways to operate more efficiently, and that's helped us drive our all-in sustaining costs below $1000 per ounce this quarter. I'm also pleased to report that Batu Hijau's mine and mill are running at full capacity. We've exported about 75,000 tons of copper concentrates since receiving an export permit in the latter part of September. Second, we're building a stronger asset portfolio. We received our Right of Exploitation from Merian in late August, and construction mobilization is underway. I got a firsthand look at the Turf Vent Shaft last month, and that project is proceeding safely, on-time, and on-budget. We also announced the sale of our stake in La Herradura, bringing our total proceeds from asset sales to about $1.3 billion since mid-2013. Third, we're ultimately here to create value for our shareholders. During the third quarter, we generated $51 million in free cash flow, and reduced our capital expenditures by 30% over the prior year quarter. Let's turn to Slide 6 for production results. We remain on track to meet production guidance for 2014. Third quarter production is down 10% versus the prior year quarter, but if we adjust for the sale of Midas and Jundee, that number drops to 4%. I'll take a minute to walk you through each region now. In North America, production was down from the prior year quarter due to planned stripping campaigns at Carlin and Twin Creeks, and the sale of Midas. South America production was also slightly lower than prior year quarter, due to planned processing of lower grade stockpiled ore. We've seen sequential improvements since the second quarter, and we expect production to continue to increase in the fourth quarter as we reach higher grades. In Australia and New Zealand, production was about 20% below the prior year quarter, in line with plans to [mine] (ph) lower grade ore at Boddington and Tanami, as well as the sale of Jundee. Here too we expect stronger fourth quarter production As I mentioned earlier, Batu Hijau is now operating at full capacity. We anticipate producing between 25,000 and 35,000 ounces of gold in 2014, and we remain on track to reach higher grade Phase 6 ore in the first half of 2015. Finally, in Africa, gold production increased 48% over the prior year quarter with continued steady production at Akyem, our lowest cost operation. We recently achieved the milestone of a half a million ounces of gold produced at Akyem since its commissioning last year. Let's turn to Slide 7, and take a closer look at costs. Our year-to-date cash all-in sustaining cost savings totaled $630 million. This brings us to a total of $1.6 billion in cost reductions since the beginning of 2013. Savings in gold all-in sustaining cost for the quarter were offset by higher copper all-in sustaining cost due to the shutdown in Indonesia earlier this year. We've also made adjustments to reflect the sale of Midas and Jundee. These savings are the result of making many improvements across the business. Examples include extending asset life from tires to mill liners, optimizing payloads and throughput, and streamlining our overhead costs. We reduced gold all-in sustaining cost to $995 dollars per ounce, down from $1018 per ounce in the prior year quarter. Our target is to have all-in sustaining costs at or below $1000 per ounce at all of our operations. Now, I'll hand it over to Laurie to review our third quarter financial results. Laurie Brlas Thanks, Gary, and thanks again to everyone for joining us this morning. As Gary described, our results indicate that our focus on cost and portfolio optimization has resulted in strong financial performance for the quarter. With our Q3 results, we reduced costs, delivered positive free cash flow, and improved our guidance. Turning to Slide 9, and comparing Q3 to the prior year quarter; our Q3 reported net income from continuing operations was $210 million, including a tax benefit due to an IRS settlement and expected tax refunds in Australia. As a result, we have adjusted our full year 2014 tax rate guidance to 17% to 22% to reflect our year-to-date results, including non-operating items. Our long-term operating tax rate outlook remains unchanged at 37% to 40%. Although we'll see quarter-to-quarter swings in our tax rate. As you can see we experienced a 14% drop in revenue over the prior year quarter as a result of a 4% drop in the gold price and a lower production Gary described earlier. We reported adjusted net income of $249 million or $0.50 per share. This was above the $217 million in the prior year quarter or $0.44 per share, as cost savings and tax gains more than offset lower gold production and pricing. Cash provided from continuing operations was very strong at $328 million, reflecting our commitment to reducing cost and improving efficiency. During the quarter, we also paid our previously announced dividend. Earlier this week, our board approved the dividend of the same amount payable in December of this year. This is based on our gold price-linked dividend policy and the average London P.M. Fix during the third quarter of $1282 per ounce. We continue to be focused on generating value, and we achieved $51 million in positive free cash flow from continuing operations in the quarter. I'm also pleased to note that we're free cash flow positive on a year-to-date basis. Turning to Slide 10, we reconcile Q3 net income to adjusted net income. The primary adjustments to our GAAP net income include a $17 million gain on asset sale, following the sale of Jundee and McCoy/Cove during the quarter; $11 million of restructuring charges related to workforce reduction, $19 million of cost at Batu Hijau related to the suspended operation, and a $21 million tax valuation allowance related to our tax planning efforts. After excluding these items, we reported adjusted net income of $249 million or $0.50 per share for the quarter. Due to the revised royalties and export duties agreed at Batu Hijau, we recorded a net realizable value or NRV stockpile adjustment of approximately $194 million; $160 million of this is attributed to CAS with the remainder attributed to depreciation and amortization. Excluding these NRVs and suspension costs, our Batu Hijau copper CAS would have been approximately 78% lower for the quarter. In addition, excluding these NRVs and abnormal production costs at Batu Hijau, total company CAS would have been $688 per ounce and $2.26 per pound of copper. And keep in mind that this applies to our sale volume, which is significantly higher than production this quarter particularly for copper as we continue to work down the Batu Hijau inventory built earlier this year. That's in contrast to the second quarter when our production was higher than sales. We've also returned $102 million to our shareholders so far this year. Slide 12 illustrates our debt repayment schedule. As you can see, we do not have any significant debt due until 2019 and have maintained an investment grade rating and metrics, which remains a priority for Newmont. We have a $575 million convertible due in 2017, which we expect we could refinance in the capital market. A revolver has only one financial covenant maximum net debt to book capital of 62.5%, which we were at 27.9% as of September 30, 2014. Our net debt at September 30th was $5 billion. Including the cash proceeds from the sale of La Herradura, which we received shortly after quarter end, our net debt would be $4.5 billion. And now, I'll turn it back over to Gary.
  • Gary Goldberg:
    Thanks, Laurie. Turning to Slide 14; we're confident that we can continue our trajectory of lower cost and steady production, and we're improving our 2014 guidance again as a result. We're lowering our outlook for gold cost applicable to sales between $710 and $750 per ounce for the year. Four of our five regions have also lowered their outlook for gold all-in sustaining costs. This adds up to a reduced outlook of between $1020 and $1080 per ounce. Our 2014 capital expenditure outlook has also been reduced by nearly 20% as we continue to realize savings through our full potential program and other improvement initiatives. Finally, the only change to our 2015 and 2016 guidance was to remove La Herradura. Let's turn to Slide 15 for a quick update on Merian. As I mentioned earlier, we recently received our Right of Exploitation from Merian, which triggered the start of construction. Mining equipment is arriving on site and we're clearing grounds for the process facilities and camp. We'll be mining near-surface saprolite ore for the first five or six years. During that period, we expect average annual production of between 400,000 and 500,000 ounces of gold at all-in sustaining cost of between $750 and $850 per ounce. These cost estimates are escalated. And if you're to exclude inflation, they would be closer to the bottom of that range. I'll also point out that Merian's stripping ratio is 3 to 1 for the life of the mine, which compares favorably to other open pit projects. Finally, we have gold reserves of 4.2 million ounces and resources of 1.7 million ounces, and exploration continues to yield positive results. You can see here on this slide on the lower right, the target area is denoted in doted red where we're looking to extend the deposit out to the southeast and the northwest, and also to do in-fill drilling along the center of the central pit there, Merian II pit. Turning to Slide 16; another growth options, we've improved the value and viability of our project pipeline significantly over last year. In Nevada, the Turf Vent Shaft is expected to reach full depth of 2050 feet in the first quarter of 2015, and to achieve commercial production by the fourth quarter. The shaft will allow the region to increase high grade ore to mill 6, adding 100,000 to 150,000 ounces annually, while improving cost and efficiency. In New Zealand, we're extending the life of our Waihi operations through our new Correnso mine. We continue to take a phased approach to developing Long Canyon, which represents another promising new district. The first phase is expected to deliver about 150,000 ounces of production per year at competitive cost. We anticipate reaching a decision on whether to proceed during the first quarter of 2015. In Africa, we're advancing the Ahafo mill expansion, which will help offset the impacts of lower grade ore. We're looking to reach a decision on this project in the latter half of 2015. Developing Ahafo Subika underground mine would give us access to ore with grades that are four times higher than the surface mine, and add 200,000 ounces of production annually. We expect to reach a decision on Subika by early 2016. In Australia, we're advancing our Tanami expansion project. This new project is an outcome of our full potential program and includes constructing a second decline in the mine. We anticipate reaching a decision to fund this project in early 2015. Moving to South America, we continue to explore our options with Conga, but would not proceed without social acceptance and solid project economics. We're also exploring the possibility of bringing in an additional partner. Options to extend mine life in Yanacocha include the Ynacocha sulfides and Chaqui sulfides projects, as well as Quecher, a potential oxide mine near the existing pit. Our work to optimize our pipeline will continue, and I look forward to bring you more news in these projects in early 2015. Wrapping up on Slide 17; we've had another great quarter, and we continued to focus on delivering on our three primary commitments; continuous cost and efficiency improvement, which means operating more efficiently, portfolio optimization by divesting non-core assets and developing the next generation of Newmont mines, and value creation by maintaining a strong balance sheet and improving shareholder returns. Thank you for your time. I'd like to now turn it back to the operator to field questions.
  • Operator:
    Thank you. (Operator Instructions) Our first question comes from David Haughton with Bank of Montreal. Your line is open.
  • David Haughton:
    Good morning, Gary and Laurie, and others in the room. Thank you for the update. A surprisingly strong quarter coming through for you guys, which is good to see, and you've maintained your production guidance. It implies a fairly strong fourth quarter, and in a few of your operations it suggests that, that quarter would be better than what we had seen previously for the other three quarters, specifically at Yanecocha, Tanami and Boddington. Can you just talk about your confidence in making sure the fourth quarter is a record for the year?
  • Gary Goldberg:
    I'm happy to do that, David. And as I look at those three specific operations, and we have flagged that, Yanecocha in particular, that the grades and the production in the first half would be made up and come back strongly in the second half. That looks to be well on track. Tanami is going through a transition in their mining areas, which will be changing during the fourth quarter, and that we expect to see better grades in Boddington, partially grades, but also we had the mill shutdown in the third quarter that was -- we expect to see that moving forward in the fourth quarter as well as location of where we're at in the mine. So confident very well in all three of those areas that will be coming in, and like we've been here over the last several quarters within our overall guidance.
  • David Haughton:
    And moving into the better mine sequencing at those operations, do you see those better grades carrying over into 2015?
  • Gary Goldberg:
    Yes. We plan to give an update on our '15 through '17 guidance here over the next couple of months, but right now we see basically -- well, Yanecocha will go through a changeover that three-year period, which we've already highlighted as production comes off, but really see that production continuing well at those two, and the rest of our operations. We'll see a bit of a recovery. So we've talked about before in -- and I don't want to get into all the details of all the different regions, we'll save that for a couple of months from now, but at Carlin as we get through the stripping phase at both Carlin and then also at Twin Creeks.
  • David Haughton:
    And also on the saving front, good saving on the capital front; it looks like your guidance is down over 200 million for the year. To what extent should we be thinking about those savings being deferrals versus outright savings?
  • Gary Goldberg:
    It's the big thing I keep an eye on, David. When we look in -- we've just been going through our planning perhaps as for '15 to '17 and you can expect to see those sustaining capital cost to remain consistent through the three-year period going forward from this year.
  • David Haughton:
    Okay.
  • Gary Goldberg:
    No carpet rolls is the term that I use.
  • David Haughton:
    Can you repeat that, sorry?
  • Gary Goldberg:
    No carpet rolls is the term that I use. No bumps out there. We haven't deferred and pushed things out till next year.
  • David Haughton:
    Okay. And then, just over to Batu Hijau back in there now and presumably getting into the better grade material from Phase 6 into next year. Will that timing work for you to be able to get into that high grade material during the dry season?
  • Gary Goldberg:
    Yes. In fact good point in terms of where pit water levels are, but we look good in 2015 timing-wise, second quarter to be matched with what we've planned for our forecast going out through '15. We have the wet and dry seasons and we work up in the upper part of the areas as we go through and make sure we match the pit pumping, but it does coordinate well.
  • David Haughton:
    Okay. Thank you, Gary.
  • Gary Goldberg:
    Thanks, David.
  • Operator:
    Our next question comes from Brian MacArthur with UBS. You may ask your question.
  • Brian MacArthur:
    Hi, good morning. Just following up on Batu Hijau, in your guidance I see we still continue to assume we're going to sell down our next 7%. Now that everything's resolved there, are we actually making progress on that or is that just an assumption you made for (indiscernible), obviously if you can sell that, that will help bring down the balance sheet as well?
  • Gary Goldberg:
    Yes, Brian. We continue to maintain that assumption because we have an agreement with the government for them to acquire that 7% stake. At this stage there haven't been any real substantive discussions in with the change of government. They'd just have to see whether they want to take that option up, but it hasn't been an issue either. I think as we went through our discussions around changes to the MoU, the need to divest was not an issue. That was raised with the government. So, although we're at 44%, this is the last 7% of divestiture, it hasn't been raised as an issue by the government. So it's one we'll keep people posted on if that situation changes. But we've made that assumption in our plan for now going forward that it goes into effect from the beginning of the year.
  • Brian MacArthur:
    Great, thanks very much.
  • Gary Goldberg:
    Thanks, Brian.
  • Operator:
    Our next question comes from Patrick Chidley with HSBC. Your line is open.
  • Patrick Chidley:
    Good morning, Gary, everybody.
  • Gary Goldberg:
    Good morning, Patrick.
  • Patrick Chidley:
    I just wanted to ask a quick question about the elephant in the room which is the gold price obviously coming down significantly today and this last couple of weeks. I'm wondering if you can give us any color on what's going on the refining side, and if you're seeing good demand at the Valcambi refinery and what sort of comments on the physical flow of metal that maybe you can anoint us with.
  • Gary Goldberg:
    Thanks, Patrick. I think as we look at -- we can look at the gold price day-to-day, but I'm really pleased over the last two years the work we've been doing within the business to make sure that we're prepared for lower prices, and don't have to be making knee-jerk shifts within the business as we address the market environment. As we've looked at things, and I tend to look at things in the medium to long-term on where that is, we do see good strong demand into China, in particular, and good flows from Valcambi into India is what we've been seeing. So I think with the price and what we've seen as prices have dropped ground in this range or now lower today, we've seen a good response in terms of buying in the marketplace that tends to support price. But with that said, we continue to keep focused on controlling what we do control within the business.
  • Patrick Chidley:
    Right. Okay, good. Anyway, thanks very much and congratulations on the quarter.
  • Gary Goldberg:
    Thanks, Patrick.
  • Operator:
    Our next question comes from Andrew Quail with Goldman Sachs. You may ask your question.
  • Andrew Quail:
    Hi, morning guys. Congratulations on a good quarter, and thanks for taking my question. Firstly, maybe one to Laurie, can we dig down to the tax adjustments, and add just add a little bit more detail on that tax refund in Australia.
  • Laurie Brlas:
    Sure. There were a variety of tax things that happened during the quarter, and we've got one question before on why we carve certain things out and not others. The piece that we carved out from adjusted net income was related to prior years and it wasn't a settlement and part of it is going forward how we can treat NRVs in Australia. The piece that is in the current quarter is related to some of the sales that we had; the asset sales and the valuation allowances on those. There is quite a bit of detail in the 10-Q and we can mark you through in more detail if you'd like.
  • Andrew Quail:
    And the first refund, is that (indiscernible) in there as well or is that number sort of say like, second part of the whole tax adjustment?
  • Laurie Brlas:
    Well, there is a refund that we expect that we haven't received yet. So it wouldn't be in our cash yet.
  • Andrew Quail:
    Okay, got you. Okay, I understand. And (indiscernible) obviously with Merian and may be with some of Patrick's question, I mean, is there gold pricing the back of your mind, this might be slowed down or is it sort of now we've got the permit, it's forced on your head?
  • Gary Goldberg:
    No, Andrew. As you look at Merian and also the Turf Vent Shaft, those are projects we've initiated and moving forward with. We've got the government that has a decision to make and they appear to be moving forward to prepare for it in Suriname to take on up to a 25% equity interest, which reduces the cost. I think with our current cash position in we're at, we're in a strong position and move forward. It's a good project and it's a good returns in the first five or six years producing 400,000 to 500,000 ounces a year. So we'll keep an eye on the market obviously if it changes dramatically more, but today I don't see that changing.
  • Laurie Brlas:
    Yes, that's right. With the cash balance we ended the quarter with and then the addition of both sales of our La Herradura cash coming into after the quarter that puts us in a good position to fund it.
  • Andrew Quail:
    And is that -- those inflation rates you're talking about, is that (indiscernible) what's the sort of -- is that obviously we've done CapEx as well. But is that what's the split of like U.S dollar versus other currencies?
  • Gary Goldberg:
    Yes, what we've built in and I do this in part as a rigor within the business that people have to work to offset inflation. So we basically have built into our plans a 3% a year inflation into both our operating and our capital costs, and it's Chris and his team' task to look at ways to pull potential and other ways to offset that. For instance, supply cost, we've been meeting with suppliers here for almost the two-year period looking at changes in our longer term contracts we have with them and renegotiating terms to ones that make more sense in today's marketplace.
  • Andrew Quail:
    Truly, thanks guys.
  • Gary Goldberg:
    Great. Thanks, Andrew.
  • Operator:
    Our next question comes from Jorge Beristain with Deutsche Bank. You may ask your question.
  • Jorge Beristain:
    Good morning; Jorge with DB. I guess maybe my first question is for Laurie. I just was looking at the full year guidance that you're maintaining for other expenses, which is on an annual 2014 basis still quoted at a 150 to a 175 million. You've done a 161 million of these other expenses in the first nine months. So, would seem that you've kind of hit your mid-point. So, my question is could you just shed some more light on what those actual recurrent other expenses are. Are you looking for basically zero in the fourth quarter and why you keep using that category as opposed to putting them say inside of cost of goods sold or SG&A as they do seem to be recurrent to support the business?
  • Laurie Brlas:
    Yes. There's a variety of things that go through there. I mean, regional admin and community development are the main expenses that go through there. But we also would have severance and that hit this quarter and some of the severance would be something we would carve out normally. So, that probably is a, the severance is a little higher than we would have originally anticipated at the beginning of the year.
  • Jorge Beristain:
    Is there the likelihood that you're going to again use this category than in the fourth quarter, so that you might exceed your full year guidance metric there?
  • Laurie Brlas:
    On a GAAP basis, we might, but on an adjusted basis we wouldn't because of severance in there.
  • Jorge Beristain:
    Okay. And my other question is in again this probably falls to you. Would it be possible to start including a kind of an EBITDA and or an adjusted EBITDA for Newmont just given the numerous charges we've seen as operations or facing head wins. It just makes a very difficult to kind of calculate core operating cash flow for the company. So, that's just a request I would put out there.
  • Laurie Brlas:
    We'll take that under in five minute and have a discussion about that. Thanks, Jorge.
  • Operator:
    Our next question comes from Anita Soni with Credit Suisse. Your line is open.
  • Anita Soni:
    All right. Good morning, guys. Just a question -- two questions, first with regards to the other income what was in that bucket of 79 million?
  • Laurie Brlas:
    That would be the gain on sale of the assets that we had, is the biggest item on it and then also some of our foreign hedging gains would come through there as well.
  • Anita Soni:
    Hedging gains, okay. And what again do you have hedging gains?
  • Laurie Brlas:
    Pardon?
  • Anita Soni:
    For your hedging, what specifically are those hedging gains that (indiscernible).
  • Laurie Brlas:
    Australian dollar.
  • Gary Goldberg:
    Primarily, the Australian dollar is the largest portion of it. We also do a little bit with the Kiwi and some diesel fuel hedging.
  • Laurie Brlas:
    It's primarily the Australian dollar.
  • Anita Soni:
    And second question is with respect to the gold price. What -- remind me again what you've used to estimate your reserves last year and what your resources were done at?
  • Gary Goldberg:
    Anita, we used $1300 for reserve price and $1400 for resource price.
  • Anita Soni:
    Okay. Thank you.
  • Gary Goldberg:
    Thank you, Anita.
  • Operator:
    Our final question comes from Adam Graf with Cowen. Your line is open.
  • Adam Graf:
    Final question; wow, okay, I've got one final question but it's in four parts. How is that?
  • Laurie Brlas:
    Okay.
  • Gary Goldberg:
    Go for it.
  • Adam Graf:
    Could you guys, when we were out in August and at the Carlin operations and looking at the Turf Vent Shaft, you guys put out a pretty detail posture there of how you saw the ramp-up and it look like you guys were expecting to double throughput capacity there through the Greater Turf Leeville. And maybe you can give us some further details about how that ramp, how you see that ramp up in coming through in 2015 and in 2016.
  • Gary Goldberg:
    Sure, Adam. What I'll do is hand it over to Chris Robison to go through it. It definitely isn't doubling the throughput, but over to Chris.
  • Chris Robison:
    Adam, I think as Gary mentioned earlier, we increased production with the Turf Vent Shaft. We increased production somewhere in the 115,000 ounces per year going forward. I think what that graph showed was also showing without the Turf Vent Shaft, the decline in production that would occur. But anyway the project is on as Gary mentioned earlier on plan in terms of time and price, probably couple of weeks ahead actually, but again, certainly not doubling production.
  • Gary Goldberg:
    I think if we come on at the end of '15, then we'd see the full impact in 2016.
  • Adam Graf:
    Could you give us an idea of what you're expecting them expecting them out of the Greater Turf Leeville in 2016?
  • Gary Goldberg:
    Yes, what we'll do Adam, when we go and give guidance for the future years, which will do here in next couple of months as we rollout the '15 through '17 guidance. We'll give more detail on that?
  • Adam Graf:
    Jumping to the other side of the world, on Correnso and Waihi, I know you're spending some money there. Could you give us an idea what the remaining mine life would be. I remember at one point Waihi was an asset you guys would consider selling and I wonder that's still on the block?
  • Gary Goldberg:
    Yes, I think what we always get lots of people knocking on the door, not lot of them have cash, but we'll always talk if there's the right value there on any of our assets, but with regards to Waihi, the Correnso extension added about three or four years of mine life. We have recently also obtained access to the area to the north of the pit that we didn't have the exploration tenements on. So doing drilling there to see what extensions might go in the other direction at Waihi.
  • Adam Graf:
    Okay. (Indiscernible) you got at least another four-five years?
  • Gary Goldberg:
    Three or four years.
  • Adam Graf:
    Three or four years. And then at Tanami with the construction you guys are doing -- the expansion you guys are doing there and then with the potential to add federation to Tanami operations, what's the mine like you guys are looking at there?
  • Gary Goldberg:
    We're looking at literally, decades in terms of additional mine life there. Currently up to 2025 but when you look -- we haven't included federation in that at this stage because it's still undergoing exploration. The key with Tanami what this expansion program we're talking about, they were currently mine constraint and we're looking to add just like decline there to remove that constraint movement of the mine equipment. At some point in future we'll move deeper and we'd look to put in a shaft that's not what we're talking about at this stage. It's really doing things through the decline and the double decline improving the mine efficiency, we'll do some small things at the mill to make sure it can handle the additional ores that's coming through. That's really the crux of it. It's in terms of return. It's one of the better projects I've seen. We talk more about that once we get to an approval stage at early next year.
  • Adam Graf:
    It's to maintain the 6000 to 7000 tons a day of throughput level?
  • Gary Goldberg:
    It actually is to improve that throughput level.
  • Adam Graf:
    Okay, very good, very good. And then maybe just hopping over to Africa, for this Subika underground project, what's the range of upfront CapEx to get that up and running?
  • Gary Goldberg:
    It's in roughly $200 million to $250 million rage to bring that up and running. We've actually, with some of the work we've done, we've test ops to test ground conditions, and recoveries, we're seeing good results there but doing -- we received an exploration permit there in the last couple of months to extend and do more drilling underground and we're doing that now to confirm the continuity, the ore body and the quality of the grades.
  • Adam Graf:
    Excellent. When -- I apologize, when you're going to bring that -- when you think you can bring that to the board for a decision?
  • Gary Goldberg:
    That one would come in early 2016. That's what we have in the timeline today.
  • Adam Graf:
    I'm sorry. That's when it comes to the board or that's when you break ground and …
  • Gary Goldberg:
    That's when it comes to the board.
  • Adam Graf:
    Got it. Excellent. Thank you for taking all my questions.
  • Gary Goldberg:
    No. No worries, thanks, Adam, I appreciate the questions and I appreciate everybody's questions here in this morning in obviously turbulent gold price environment. I think the business continues to deliver as we have committed to along the way. I appreciate the efforts that our team are making to keep focused on controlling what they control. Thank you for your interest, and have a good rest of your day.
  • Operator:
    That does conclude today's conference. Thank you for participating. You may disconnect at this time.