Newmont Corporation
Q3 2015 Earnings Call Transcript

Published: 31 Oct 2015

[Operator:]

Good morning, and welcome to the Newmont Mining Third Quarter 2015 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 anyone has any objections, please disconnect at this time. I'd now like to turn the call over to Meredith Bandy, Vice President of Investor Relations. You may begin.

[Meredith Bandy:]

Thank you, Operator. Good morning everyone and welcome to Newmont's third quarter earnings conference call. Joining us on the call today are Gary Goldberg, President and Chief Executive Officer and Laurie Brlas, Chief Financial Officer. They and other member of our executive team will be available to answer questions at the end of the call. Turning to Slide 2, before I go any further, please take a moment to review the cautionary statement shown here or refer to our SEC filings which can be found on our website at newmont.com. With that, I'll turn it over to Gary.

[Gary Goldberg:]

Thanks Meredith and good morning everyone. I’m pleased to report that Newmont delivered another strong quarter, and I appreciate the opportunity to walk you through the details now. Our operations continued to drive costs down, work more safely and increase gold and copper production compared to the prior year quarter. This performance helped us double our operating cash flow, significantly improve adjusted EBITDA, and deliver a nine fold increase in free cash flow compared to last year, despite lower metal prices. Our portfolio is also stronger than it was a year ago. We executed value accretive transactions and remained on track with our four development projects in the Americas. We also announced the decision to proceed with our Tanami expansion project in Australia. Finally, we strengthened our balance sheet, met our commitment to pay dividends, and repaid $50 million of debt. I’ll turn to slide 4 for more on these achievements. We continue to execute the three elements of our strategy; first, we improved our underlying business by lowering injury rates 15%, decreasing all-in sustaining cost 16%, and increasing gold production 16% quarter-on-quarter. We also tripled capital production. Second, we strengthened our portfolio by acquiring Cripple Creek and Victor, and selling assets that represent lower value or higher risk to Newmont. We remain on schedule and on or under budget at Turf Vent Shaft, Merian, and Long Canyon Phase 1. We are also moving forward with the Tanami expansion project, an investment that will increase profitable production and extend mine life at very competitive returns. Finally, we created shareholder value by generating $758 million in adjusted EBITDA and $478 million in free cash flow during the third quarter. This allowed us to continue to self-fund our best projects, pay dividends and pay down debt, delivering our strategy starts at the mine phase. Turning to slide 5, I visited the team earlier this month and was impressed with our newest operations performance. The team recently reached one year working with zero harm and is delivering exceptional business results. This is the bar we’re setting for all our operations. Overall, our total injury rates were 15% lower than the prior year quarter and remained among the lower in the mining industry. This performance is over shadowed however by loss of a contractor working on a tree cutting team in Indonesia. [Hack master Teddy] was stuck in the upper body by a falling tree and recently succumbed to his injuries. Our thoughts are with his family and his colleagues. Our work to make our operation safer and more efficient never ends. Turning to our cost performance on slide 6; our gold all-in sustaining cost were $835 per ounce for the quarter, bringing our year-to-date cost to $864 per ounce. This represents a 27% reduction since 2012. About half the improvements we achieved in the third quarter are the results of sustainable cost and efficiency improvements across the portfolio and higher productivity in sales at low cost operations. We also benefited from favorable oil price and exchange rates, and some delayed timing in our capital expenditures. Turning to production on slide 7; we produced more than 1.3 million attributable ounces of gold during the third quarter. This constitutes 16% more than the prior year quarter and our highest output in the last seven quarters. New product from CC&V offset about two-thirds of the reductions associated with divestments. We also produced 48,000 tonnes of copper mostly as a result of higher grades at Batu Hijau. I’ll highlight four operations that drove this performance; at Batu Hijau third quarter production reflected higher AISC or grades which we’ll mine through 2017; at Boddington, mine plan and full potential improvement unlock higher grades, and increased mill utilization and recoveries. Tanami delivered strong product and on the back of higher grades and improved productivity and also no utilization which were achieved through full potential. And finally, Twin Creeks benefited from improved mill grades and the completion of a plant stripping campaign. Putting it all together, our operations are doing good work to maximize opportunities and mitigate challenges. Turning to slide 8; in North America the Turf Vent Shaft remains unscheduled to reach commercial production in the fourth quarter and will be completed below budget. Engineering and mine development also remain on track at Long Canyon, where we continue to expect first production in 2017. You can see the leach pad and other surface facilities in this photo. The CC&V integration is also progressing and the operation celebrated 5 million ounces of gold produced last month. Ramp up to full mill capacity is slightly behind schedule and we’ve adjusted our outlook accordingly. We are working out the bugs and the delay is not expected to impact longer term production. Turning to South America; Merian remains on budget and on schedule to begin producing in 2016. Construction is just over 40% complete and we’ve stockpiled more than 930,000 tonnes of ore at higher than planned grades. We are also advancing Project Integral, a phased approach to developing Yanacocha’s remaining oxide and sulfide deposits and we’ll have initial findings by mid-2016. In Africa, we are now operating at full capacity at Grid power and Ahafo’s new generators will be commissioned by year end. We’re also advancing our broader power strategy to secure reliable and affordable supply over the long term. In Indonesia, we expect our export permit to be renewed in the near future, and continue to work with the government to finalize amendments to our contract of work. In the meantime we are operating at full capacity and storing concentrate or shipping it to Gresik for processing. In Australia we’ve announced that we are moving forward with the Tanami expansion project. Turning to slide 9, since 2012 Tanami has more than doubled its gold production, while cutting cost by about 2/3rd and significantly improving resource confidence. The Tanami expansion project builds on this trajectory. It involves constructing a second decline in the underground mine and incremental capacity in the plant to increase profitable production and extend the mine life. The project is the outcome of a detailed review of option to maximize near term cash flow and long term asset value. In the first five years of full production, the expansion will increase Tanami’s average annual gold production by 80,000 ounces, lower all-in sustaining costs by between 5% and 10% and extend mine life by three years. First production is expected in the second half of 2017. Adding a second decline will also serve as a platform for exploration drilling to support future expansions. As I mentioned last quarter, we see the potential to double current reserves and resources at comparable grades by expanding the Callie and Auron deposits and developing new discoveries at Federation and Liberator. We are excited about this project and what the team has done to optimize it. For an investment of between $100 million and $120 million the project provides a return of more than 35% at $1100 gold and more than 25% at gold prices as low as $900 per ounce. With that I’ll hand it over to Laurie for an update on our financial results.

[Laurie Brlas:]

Thanks Gary and good morning everyone. I’m pleased to report that Newmont delivered a great quarter with solid financial results. Turning to slide 11, as Gary mentioned, we continue to see cost improvement across the portfolio. Our third quarter gold cost applicable to sales per ounce and gold all-in sustaining cost per ounce were 14% and 16% favorable respectively to the prior year quarter. With these most recent results, we have maintained our portfolio all-in sustaining cost below a $1000 per ounce for the last five quarters running. Gold product was also strong in the quarter, and was up 16% from the prior year. Despite a 13% decline in the average realized gold price from a year ago, we continue to generate strong earning and robust cash flows. Turning to slide 12, during the third quarter, revenue was up 16% and we generated $183 million in cash from continuing operations, an increase of more than 148% from the year ago quarter. Adjusted EBITDA was up 67% from the prior year due to higher production at Batu Hijau, Boddington, Tanami and Twin Creeks, improved oil prices and exchange rates and ongoing costs and efficiency improvement. Consolidate free cash flow was $478 million during the third quarter, as higher sales volume and improved costs offset increased development capital spending at Merian and Long Canyon Phase 1. With these most recent results, our year-to-date free cash flow has grown to $941 million, an amount roughly eight times more than what was generated a year ago. We reported adjusted net income of a $126 million in the third quarter or $0.23 per share, compared to $249 million or $0.50 per share last year. Turning to slide 13, we walk through the adjusted net income adjustments, which include a $0.04 per share gain, related to discontinued operations, a $0.10 per share gain related to the TMAC deconsolidation. In the past we’ve fully consolidated TMAC by the fine completion of their IPO that is no longer required for accounting purposes. So their results will not be included in our line-by-line numbers going forward and instead will be captured in our equity income line. This gain was on the actual event of deconsolidation and we carved it out for purposes of adjusted net income. It also gave rise to a $0.05 per share gain, resulting from an adjustment to our tax valuation allowances. In the quarter, we also recognized the $0.07 per share on asset sales, primary our stake in the Valcambi refinery. For adjusted net income purposes we also carved out a $0.04 per share loss related to impairments and loss provisions and a $0.03 per share loss related to restructuring acquisitions costs and other minor items. After reconciling for these items, we reported adjusted net income of $126 million or $0.23 per share. We are particularly pleased to note that this number includes $0.02 of accretion from the addition of CC&V to our portfolio for just a short two months. A similar outcome is seen in adjusted EBITDA of $758 million, up 67% from the prior year. It is adjusted for essentially the unusual item. Now turning to slide 14, a strong balance sheet provides a competitive advantage and a volatile gold price environment, and we continue to execute on capital priorities designed to safeguard our investment grade ratings. At the end of the third quarter, our balance sheet had roughly $3 billion in cash and cash equivalent. In addition, we had about $400 million in marketable securities and a $3 billion revolver that is essentially undrawn. In total that $6.4 billion of liquidity. This and our strong cash flow in 2015 gives us the comfort that we can start and finish our projects without having to take on additional debt to fund them. During the third quarter, we repaid $50 million of debt towards the PTNNT revolver. This brings our year-to-date total debt payments to $330 million. We expect to pay down further debt later this year and are on track to repay a total of $750 million by year end. As always, further payments will be made in context of the current business and market environment, but our significant cash balance certainly supports our ability to pay off additional debt. Given our existing cash balances and revolver, we have ample flexibility to execute on our capital priorities and are actively monitoring the gold price in the fixed income market to evaluate our options. We also maintained our dividend in light of our strong cash flow and operating performance. As a reminder, we have no significant debt maturities due until 2019, and our current net debt to book capital of 19% is well below the maximum 62.5% covenant on our revolver, which is our only covenant. And now turning to slide 15, we are proud that our net debt-to-EBITDA ratio of roughly 1.1 is among the lowest in the industry and has continued to improve. We have transformed Newmont’s balance sheet in to one of the strongest in the sector, and our liquidity and cash flow generation separate us from the competition. We have reduced our net debt by 32% from the prior year quarter, and more importantly we have reduced net debt while also growing our EBITDA which significantly improves our financial flexibility. We remain comfortable with our relative level of debt and maturity profile, and we will continue to examine ways to reduce the absolute debt level and increase the long term strength of our business. And now I’ll turn the call back over to Gary.

[Gary Goldberg:]

Thanks Laurie. I’ll shift gears now to look at the future turning to slide 17. We expect to end 2015 with attributable gold production at the higher end of our guidance range, which is between 4.7 and 5.1 million ounces and capital production of between 140 and 180 tonnes. The changes we are making to our 2015 guidance are two fold; first, we are lowering our outlook for gold all-in sustaining cost 4% to between $880 and $940 per ounce. This reflects strong performance particularly in Asia Pacific and Africa, as well as lower exchange rates in favorable power and diesel prices. We expect these costs to rise slightly in the fourth quarter, due to higher exploration and advance project spending, sustaining capital timing and lower grades Yanacocha and Ahafo. Second, we lowered our full year outlook for capital expenditure by about 9% to between $1.4 billion and $1.6 billion. This reduction reflects lower sustaining capital expenditures of between $740 million and $780 million or 13% below previous guidance, gains of cost and efficiency improvements at Yanacocha, Boddington, Batu Hijauj, Ahafo and [Akyem], as well as some timing impacts. Our improved outlook also reflects lower development capital including $50 million in savings at Merian realized through supply chain improvements, favorable exchange rates and lower commodity prices. This reduction is partially offset by new development capital for the Tanami expansion project. Our project pipeline continues to be one of the strongest in the gold sector. Turning to slide 18, our projects focus on profitably extending the life our existing operations or opening perspective new mining districts. Before we reach funding decisions, we scrutinize our approach to each project with a goal to lower initial capital cost, accelerate payback and leverage existing infrastructure. Projects that are in the execution phase include the Turf Ven Shaft, which will give us access to between 100,000 and 150,000 ounces of higher grade ore per year and support further expansion at Leeville. Merian which will deliver 400,000 to 500,000 ounces of gold and all-in sustaining cost of between $650 and $750 per ounce for the first five years beginning in 2016. The Cripple Creek and Victor expansion which includes the new mill leach pad and recovery plant that will be commissioned in the second half of 2016. CC&V will contribute between 350,000 and 400,000 ounces of gold in 2016 and ’17, and is expected to lower Newmont’s overall cost profile. The first phase of Long Canyon which will add between 100,000 and 150,000 of gold production per year and all-in sustaining cost of between $500 and $600 per ounce beginning in 2017 and finally the Tanami expansion project which I touched on earlier. Further up the pipeline, we are advancing the Ahafo mill expansion and Subika Underground mine in Ghana. These projects are designed to help offset the impact of lower grades and harder ore. We’ve deferred a decision to proceed with the Ahafo mill expansion until the second half of next year to coincide with our timing on the Subika Underground decision. We are also progressing the phase 7 cut back at Batu Hijau, where we are working to secure the stability we need for ongoing investment Quecher Main which is part of the oxide expansion effort at Yanacocha and Northwest Exodus in Nevada, which would extend the current underground operation and add profitable production. Turning to exploration on slide 19, exploration is one of our core competencies. About 70% of the gold we are mining in 2015 was discovered by Newmont geologists. Our program focuses on maintaining our existing resource base while preserving options to pursue significant new discoveries. We employ rigorous standard to make sure the highest quality ounces are added to our reserve base and we’ve developed a proprietary geologic risk assessment process to improve our ore body confidence. This map shows prospects in Nevada, Peru, Ghana and Australia that we expect to be in production before 2020 and longer term prospects in the US, Ethiopia and the Guiana Shield. Turning to slide 20 for a closer look at our underground prospects of Exodus in Nevada. Exodus is a high grade underground ore body that was identified in 2008 with a 300,000 ounce discovery. Through new discoveries at Northwest Exodus in 2011 and Exodus Footwall in 2013, we’ve grown the resource base to 1.2 million ounces to date of which 300,000 ounces have been mined. We see the potential to double this figure over the next few years by converting mineral inventory in to reserves and resource and by drilling the remaining half of Exodus’s targeted mineralization. Turning to slide 21; Northwest Exodus is located several hundred meters from Exodus. We declared a maiden resource of 700,000 ounces in 2014 and expect to declare our first reserves in early 2016. Compared to our initial Exodus discovery, Northwest Exodus is larger with 50% higher grades. Mineralization remains open on the hanging wall. Turning to slide 22; the Exodus Footwall is our latest high grade discovery and is located in different stratigraphies in Exodus and Northwest Exodus. We recently identified mineralization of up to 51 meters at grades of 12.5 grams per tonne and Footwall remains open along strike and at depth. We anticipate declaring first resource at Exodus Footwall in early 2016. While we intend to pursue these opportunities, we are also prepared for ongoing market volatility. Turning to slide 23; at today’s metal prices we can afford to advance our best projects and exploration projects or prospects, fund our dividends and repay debt. This chart gives you an idea what we might do differently in a prolonged period of lower or higher gold prices. Under significant constraints, we would delay stripping campaigns and sustaining capital. We’d complete our current projects and further reduce overhead and exploration cost. As gold price improves, we’ll continue to optimize cost and capital, fund our most profitable projects, accelerate debt repayment and increase dividends in line with our policy. Getting our house in order now allows us to deliver superior margins when gold price recovers. Turning to slide 24; we are continuing to make good progress towards our goal to become the world’s most profitable and reliable gold producer. We’ll reach that goal by continuing to deliver our strategy to improve our underlying business by continuously raising our safety, cost, and technical performance to strengthen our portfolio by building a longer life, lower cost asset base, and to create shareholder value by generating cash, paying dividends and strengthening our investment grade balance sheet. Thank you for your time. I’d like to open the floor to questions now Operator.

[Operator:]

[Operator Instructions] our first question comes from the line of Mr. Andrew Quail with Goldman Sachs. Sir your line is now open.

[Andrew Quail:]

Just a couple of questions; I suppose you’ve seen obviously the benefits of the tailwinds from the Aussie dollar and oil price falling. Can you just sort of give us some comments on how you would think about going forward with hedging and would you increase your hedging exposure on the cost side.

[Gary Goldberg:]

Sure Andrew. Historically we’ve had foreign exchange hedges in place in Australia and a little bit New Zealand, of course New Zealand that Waihi is gone away. In Australia we liquidated about 2/3 of that position back about two years ago, it’s been November of 2013 and we are continuing to draw that down, it runs out. Basically it’s pretty small now and over the next two to three years it is gone but it’s a very small portion. We don’t see ourselves changing that hedge position or increasing it quite frankly. We’ve seen a good correlation between gold price in the Aussie dollar not that that drives anything, but we don’t see any need to make a change in our position on the foreign exchange rate hedging. When it comes to the diesel fuel, we basically do that in Nevada because of the ability for us to take hedge accounting and we are not taking a position on where the price will go, its’ just we do it in order to try to smooth out what the price swings might be. So we’ve got basically an evergreen type hedge book arrangement there that we continue out over a 2 to 2.5 year period to cover that. But we’re not taking any strong positions on price there either.

[Andrew Quail:]

I suppose the other one on Indonesia and on Batu. I think in the short term its fallen with the export license, but as far as looking in to sort of ’16 and I know it’d be nice to know with a crystal ball. But do you think these prices; I mean is there a time that you need to make a decision on this? Obviously with the government and more understanding about what’s happening with mineral process than you’d seen over the last couple of years.

[Gary Goldberg:]

The way we are looking at it, we need to clearly get the export permit and we expect that here in the next week or two in terms of getting that so we continue to mine through phase 6, and that’s just been part of the process every six months of renewing that. In terms of the contract to work, we do need to get those changes nailed down. We agreed those changes a little over a year ago with an MoU with the government and just really need to get that finalized and get the certainty of that as well as get the financing in place like we did to phase 6, get the financing in place to support phase 7. So I would expect and the way we’re looking at it, we’ve got over the next year to get that in place, and that’s the timeframe that we’re looking at.

[Andrew Quail:]

And I suppose the last question is on Carlin. Obviously bounced back through tonnes (inaudible). Obviously the TVS is going help that. Do you we sort of see like getting back to rates that we saw probably this time last year.

[Gary Goldberg:]

I missed the location that you were saying. Carlin, sorry. But I’m going to ask Chris Robinson to cover that.

[Chris Robinson:]

Yeah Andrew I think the key there to Carlin is as Gary mentioned earlier is the Turf Vent Shaft is that comes online we see the much higher grade coming out of Leeville which will obviously pump Carlin back up closer to where we’ve been previously.

[Andrew Quail:]

So high grade and higher tonnes.

[Chris Robinson:]

Yeah, more fixed tonnes but just higher grade that what we are putting through right now.

[Operator:]

Our next question comes from the line of Mr. John Bridges with JP Morgan. Sir your line is now open.

[John Bridges:]

Just wondered following on from your exploration commentary, how are your geologists thinking about reserves at year-end? What sort of gold price do you think you’ll be using and how do you think the reserves will look at presumably lower gold prices?

[Gary Goldberg:]

We’ll give the detailed update on that in February, when we do the update on reserves and resource at year-end, but we’ve given previous sensitivities out there on what it looks like I’d say $100 lower reserve price, and we’re using currently 1300 for reserves and at 1200. Right now I would expect we’ll probably move to 1200, but I don’t expect just to see as big a swing on the reserves is what we had shown in that sensitivity. Really two things helping that, one has been, how we’ve gotten down throughout the organization, and that helps make things economic at lower prices. The other piece has been the wing in the Aussie dollar where we would have seen potentially an impact at Boddington. I wouldn’t expect that we’d see that. But we’ll give the details and have the details on that one when we come out with reserves and resource numbers in the beginning of this next year.

[John Bridges:]

And there’s a follow-up, Merian, you were coming in the low budget with that project, just wondered if you’re learning with that process and maybe another cost of doing things in this current environment is making you think differently about some of the other projects.

[Gary Goldberg:]

Definitely, I think there’s been some very interesting approaches and good approaches taking to how equipments being assembled offsite, prepare and put together offsite. So that it eases the way we can construct it on-sight. I used the leach cell or tanks that we use for the cyanide leach portion being assembled in sections and then bolted together rather than having to bring a bunch of welders on fabricate those onsite is one simple example of that. But the more we can make modules and import things that way, in this particular location its worked out well and that could apply in other areas when I think of, for instance, Ahafo North. It’s down the road another couple of years, but I could see that applying there as well.

[Operator:]

Our next question comes from the line of Mr. Brian Yu with Citi. Sir your line is now open.

[Brian Yu:]

I wanted to circle back on the prior question, just about Indonesia and Batu. Gary you mentioned you expect to get the permit next week or two. In an alternate scenario where it doesn’t happen, how long can you keep Batu running and have sufficient onsite storage capacity, and given that like Freeport they do have their export license, are there alternatives such as probably Freeport exporting more concentrate and you guy get maybe a greater share of the smelter just to bridge any kind of timing gap.

[Gary Goldberg:]

Brian, we’re not really connected with Freeport on export permit, theirs a different condition and ours we kind of trail there’s where they had some issues once they got their permit and currency, we’ve had that addressed along the way. So that’s not an issue. Our biggest pieces just working through some final requirements the government has which is what we went through the last time through this process. We expect very [constant] and we’ll get that. Failing that, we do have about three weeks of capacity left in the concentrate storage barn and if we weren’t to have that then we’d have to look at curtailing production. But I really don’t expect that to happen, given all the things we’re hearing on the ground and the progress that’s been made.

[Brian Yu:]

And second question is just on CC&V, you mentioned a little bit of a delay in the mill ramp. Could you provide a little bit detail and then along those lines you are keeping your guidance for next year still, may be in order of magnitude and the way you talked about in terms of weeks or month in terms of slippage when it gets to full run rate.

[Gary Goldberg:]

Sure thing. I’m going to hand over and ask Chris Robinson to explain what’s going there.

[Chris Robinson:]

Yeah I think Brian there’s a couple of things that first off we are working through some designs issues that we are confident that we can solve by taking more time. So the ramp up of the actual equipment has taken a bit longer than we would have expected. I think the other aspect of it is around ore blending, making some changes around how we mine and feed the plant that we are addressing to get more throughput and maximize the grade through the plant as it was designed for. And I think the third piece that may be addresses your question longer term is, we’re looking at how to reconfigure that plant with the opportunity to take the concentrate from there rather than leaching it there and the complexities that that brings within the plant, taking that concentrate to Nevada and putting it in either our autoclaves Twin or our roster at Carlin, which is an advantage for both CC&V and absolutely the two Nevada operations.

[Brian Yu:]

And then with the design issue, so you’re going handle the concentrate may be a little bit differently. That’s not a CapEx fix?

[Chris Robinson:]

Not if, if we do the reconfiguration that we are looking at, it’s not a significant CapEx issue. The issues we’re dealing with right now are primarily around the back end of the plant, the filtration of both the tails and the con. And that’s where the lower mechanical availability is that’s driving the whole plant. But we’re confident we can fix that, but also with this reconfiguration takes pressure off that part of the plant.

[Operator:]

[Operator Instructions] our next question comes from the line of Mr. [John Tremazo with John Tremazo’s (inaudible) Research]. Sir your line is open.

[Unidentified Analyst:]

At what point in completion of the construction at Long Canyon and Merian do you think you’ll transition from construction and commissioning to renewed near mine and regional exploration. Both of those I guess are pretty fertile districts.

[Gary Goldberg:]

It’s a good question John and we quite frankly haven’t stopped our drilling there. We continue to do the drilling at both of those sites to both in-fill around, but also looking in the regions. So at Long Canyon we’re looking not only around the existing Long Canyon, but looking in that region in both Utah and Nevada. Merian, we continue to look for additional (inaudible) light ore in the area around Merian as well. So it’s not something we’ve discontinued and it fits within where we continue to look, Brown field and what we’d call wing span areas.

[Unidentified Analyst:]

So it’s possible the reserve or resources with both of those locations could rise this year.

[Gary Goldberg:]

Yeah, this year and in to next year, and probably more towards the end of ’16 that we’d be looking to declare something for those.

[Operator:]

Our next question comes from the line of Tanya Jakusconek with Scotia Bank. Ma’am your line is now open.

[Tanya Jakusconek:]

I think its Scotia Bank. But I have a few questions, one is on CC&V. May be we can have an explanation on the allocation of the purchase the acquisition purchase price to the inventory that really impacted the cash cost and then sort of what are we looking for 2016, because I think the guidance given was significantly higher. I apologies if you addressed this, I just got on the call.

[Gary Goldberg:]

Not to worry Tanya, I’m going to have Laurie talk about those details for both this year and how we’re looking at next year.

[Laurie Brlas:]

No we have not addressed that yet, so thank you very much for the question. We’re still in the process of finalizing the purchase pricing allocation work, and as you know that can have some changes in how things end up with. I would say that as we did the fair value reviews of everything, we’ve allocated a bit less to the stockpiles than you would have seen AGA do as we did fair values on every asset, and sometimes it does result in a different allocation. And that drove the lower prices. We will give our full ’16-‘17 update to guidance at the investor day in December. But I think you can assume that we will come in a bit lower than what we had originally done, but we want to complete that work before we give that information.

[Tanya Jakusconek:]

And when you say lower, would that be similar to this 2015 cash cost guidance range in the 560 to 600?

[Laurie Brlas:]

I think what you saw in the third quarter is exceptionally low, I would not expect it to be that lower than what we had originally said, but not as low as what we saw in this quarter. With it just being the first five, it’s not a full quarter period and low volume; you just have some anomalies but it sometimes come through. So I would look for it to be somewhere in between what you saw in this quarter and what we had originally thought it would be.

[Tanya Jakusconek:]

And then if I have a chance to ask another question, and again I apologize if this has already been asked. Just wanted some more clarification on some of the changes in legislatures that are going on in Peru with respect to water, and what impact that would have on Yanacocha i.e. how do we need to get the mine prepared for these new legislature and sort of costing on this and implications.

[Gary Goldberg:]

We haven’t covered that yet, but good question, it’s one that we actually have been working for a number of years with the government as they’ve brought forward new regulations and then been working with them on modifying them. They actually rolled out some regulations that exceed by almost 1,000 times what requirements are in most other countries around the world. So trying to get the regulations back to something that’s actually physically achievable on the ground. We’ve been making an investment in a water treatment plant there since earlier this year that is scheduled to be completed early next year that will put us on track to meet what we would expect to be the final regulations. So we are still working through that process with the government.

[Tanya Jakusconek:]

And has it been very cordial in terms of exceeding a thousand times the required regulations and other jurisdictions. Are they pretty amenable to acknowledging that this might be not achievable?

[Gary Goldberg:]

I think as with any of these things, you have the discussions, you lay out the facts and try to work through what’ the most reasonable approach going forward.

[Tanya Jakusconek:]

So you think you’re pretty much there, if they come to reasonableness, you are pretty much there, with your water treatment plant coming in early next year there’s nothing else.

[Gary Goldberg:]

Yeah, if we can come to alignment on that, we do believe what we’ve put forward and what we’re constructing there is going to achieve what’s needed going forward.

[Operator:]

[Operator Instructions].

[Gary Goldberg:]

Operator it doesn’t sound like we have any more.

[Operator:]

We have one more question coming from the line of Mr. Botier Sharapov with HSBC. Your line is now open.

[Botier Sharapov:]

Just a couple of questions from me. On CC&V I know its early stages and you guys are still working on the (inaudible). Just wanted to get your idea thinking about the mining costs and then y our recoveries there. You mentioned that you could reduce those by 10% and 2% respectively. And I guess with two months under your belt, what’s your current thinking, has it changed since the time you guy acquired the mine?

[Gary Goldberg:]

I think we’re still very confident on what we’ve laid out and positively impressed with some of the things we’ve found. But I’ll ask Chris Robinson to talk about that in a little more detail.

[Chris Robinson:]

Yeah Gary I’d probably just echo what you said that, we’re still confident that we can achieve those sorts of improvements in the mine as we work through, and then I think as you said its early days, our mine planning folks and technical folks continue to look at it. But we’re optimistic that we can do that. I think the other piece of it is, while we talk about the mill, the valley leach is going very well, our teams very confident that we can bring that in on time or a bit ahead of schedule, and comfortable with cost there. So while we focus a bit on the mill, the heart of the operation is the valley leach and that’s going very well early stage with our folks coming on and taking that over.

[Botier Sharapov:]

And I guess switching to Batu Hijauj phase 7, I understand you guys are still reviewing it, but maybe you could give us an early indication of what sort of financing that you’ll need for that and maybe strip ratios if possible.

[Gary Goldberg:]

Yeah, we can layout more details as we run through our guidance for next year. But in general what we did for phase 6, we got non-recourse bank financing that was put in place in rough terms. We’re looking at a total cost for the stripping campaign of around $2 billion and the financing that we currently would see required to be in the $700 million to $800 million range. But that’s sort of a rough ball park.

[Botier Sharapov:]

And I guess in terms of time how long the stripping campaign will take before you guys get in to the higher grade organ?

[Gary Goldberg:]

It would be back out to about 2022, so we are in to the ore body here for ’16 and ’17 and then that stripping campaign we don’t get in to the phase 7 ore until 2022.

[Operator:]

There are no further questions at this point. I’d now like to hand the call back to our speaker.

[Gary Goldberg:]

Thanks again for joining our third quarter earnings call this morning. Our team continues to drive stronger performance across the portfolio and the sector, and we are not resting on our laurels. Our goal is to continue improving safety and efficiency at our operations and to continue building a longer life, lower cost portfolio. Ultimately, we are working to create the value we need to fund profitable growth, pay down debt and most importantly generate cash for our shareholders. Thanks again and have a safe day.

[Operator:]

Thank you. And that concludes the conference. Thank you all for participating, you may now disconnect.