Kinross Gold Corp KGC
Q3 2011 Earnings Call Transcript
Transcript Call Date 11/03/2011

Operator: Hello, this is the Chorus Call Conference operator. Welcome to Kinross Gold Corporation's Third Quarter 2011 Results Conference Call and Webcast. As a reminder all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

At this time, I'd like to turn the conference over to Mr. Erwyn Naidoo, Vice President, Investor Relations. Please go ahead, sir.

Erwyn Naidoo - VP, IR: Thank you and good morning, ladies and gentlemen. Welcome to Kinross Gold's conference call to discuss the third quarter financial and operating results.

With us this morning, we have Tye Burt, our President and Chief Executive Officer; Paul Barry, our Chief Financial Officer; Brant Hinze, our Chief Operational Officer; Ken Thomas, our Senior Vice President of Projects; and Glen Masterman, our Senior Vice President of Exploration.

Before we begin, I'd like to bring your attention to the fact that we will be making forward-looking statements during the presentation. For a complete discussion of the risks, uncertainties, and assumptions, which may lead to actual financial results and performance being different from estimates contained in our forward-looking information, please refer to Page 2 of this presentation as well as the news release of November 2 and management discussion and analysis for the same period, as well as our most recently filed Annual Information Form, which is available on our website.

With that, I'll turn the call over to Tye Burt, President and Chief Executive Officer.

Tye W. Burt - CEO: Thanks for joining us this morning. Kinross delivered another quarter (of) strong financial results. Revenue was a new record for us exceeding $1 billion for the first time. Adjusted operating cash flow increased 82% and adjusted net earnings more than doubled compared to the same period last year, up 134% to $273.4 million.

Our margins continued to expand as described on the webcast there at Slide 5, exceeding $1,000 per attributable ounce sold for the first time. Costs per ounce were higher than the previous quarter. However, mainly as a result of higher labor and energy costs, higher royalties, and mining in some lower grade portions of the ore bodies at some of our operations.

Overall, we remain on track to deliver on our previously disclosed production and costs of sales guidance of $2.6 million to $2.7 million gold equivalent ounces at an expected cost of sales of $565 to $610 per ounce in 2011.

With two months left to go in the year, we are targeting approximately the middle of that cash cost range. However, we have updated our production in cash guidance for our particular regions and Brant will provide more detail on those calculations shortly.

In the third quarter, we made significant progress advancing our growth program. At Tasiast in Mauritania, we received approval of the environmental impact assessment for early works. Construction, contractors, and equipment are now being mobilized.

Additional EIAs for the project expansion are on schedule. Engineering work and project procurement is also continuing on schedule. The feasibility study is expected to be complete at the end of the first quarter of 2012 and the project startup is targeted for mid- 2014.

At Fruta del Norte in Ecuador, we expect to finalize a feasibility study for year-end 2011. Mine and plant EIAs were submitted in October and we continue to target startup of that mine in late 2014.

Kinross and the Ecuadorian government have made progress on negotiations regarding the exploitation agreement for FDN and have also commenced negotiations on the investment protection agreement.

Our other major growth projects continue to advance on schedule. Our global exploration effort continues to see positive results. There are some notes on Slide 7 and yesterday we were pleased to renounce a significant gold and silver discovery at La Coipa in Chile.

The Pompeya target is located on joint venture property where Kinross has a 75% beneficial interest and is approximately three kilometers from the La Coipa mill. We currently have two diamond rigs and one RC rig drilling on that project. We'll be completing further step-out and infill drilling in Q4 of this year and into 2012 to define this new target as it remains open in all directions. We currently expect to complete a resource estimate initial on Pompeya later in 2012.

The ongoing drilling campaign at Tasiast continues to confirm our confidence in the mineral resource there. We have set out several examples on Slide 8. The infill program was extended in Q3 and focused on upgrading resources in the West Branch and Piment areas. This work is now 95% complete. We'll be redeploying drills in Q4 to accelerate exploration along the mine corridor and on district targets.

Toward the end of the quarter we mobilized three core drills to the C67 area, north of West Branch, to follow-up strongly encouraging results in RC drilling completed earlier in Q3. Several examples are noted on Slide 9. Drilling will continue in Q4 and into 2012 to better understand the limits of the mineralized system and the geologic controls on gold grades. We would expect to start modeling for mineral resource estimate on C67 in 2012.

More information on the drilling results at both La Coipa and Tasiast are available in yesterday's news release and we have Glen Masterman, our Head of Exploration with us this morning to answer questions.

In the third quarter, we obtained investment-grade credit ratings for our debt and successfully completed $1 billion offering, strengthening our financial foundation for growth, improving the market's confidence in our ability to deliver on that strategy. Kinross today continues to be extremely well positioned as a pure gold leverage producer with growth from, what we consider, best in world assets and a very strong balance sheet.

I'd like to hand over to Brant for a review of our operations.

Brant E. Hinze - EVP and COO: Thank you, Tye. The final page of our press release contains an overview of operations and a mine by mine summary with key metrics. I'll give a brief review of the operation highlights for the quarter.

Performance at our U.S. operations remained strong while the mines experienced an expected drop in grade. The heap leach at Fort Knox continues to perform well. Production was slightly lower compared to the second quarter due to processing of lower grade stockpiles.

Round Mountain in Nevada had a good quarter, with production increasing 16% from second quarter. The production cost of sales per ounce improved by 10%.

At Kupol in Russia, production and cost are on target for the year. We expect operations in Kupol open pit to end as planned in the fourth quarter as the mine makes a transition to a fully underground operation.

Production and cost of sales at La Coipa were impacted in the third quarter by lower than expected grades and higher sulphide content in the ore blend which is being encountered as the final benches of Puren Phase 3 are mined out. We expect mining of Phase 3 to be completed early next year.

At Paracatu in Brazil, the third ball mill had its first full quarter of operation which helped the mine to achieve a record number of tonnes of ore processed through Plant 2. In late October, Plant 2 was temporarily shut down to address an electrical malfunction affecting the SAG mill motor. Repairs are underway and we expect the plant to restart within a week.

At the Tasiast mine in Mauritania, production costs were higher than the second quarter. This increase was largely due to plant and crusher maintenance, a ramp up in administrative costs in preparation for expansion activities and higher royalties.

At Chirano in Ghana, production was slightly lower and cost increased as it took longer than anticipated to enter a higher grade zone of the Akwaaba orebody. We are on track to achieve our 2011 Company-wide guidance of 2.6 million to 2.7 million gold equivalent ounces at a cost of sales of $565 to $610 per ounce.

However, we have made some adjustments to our regional guidance. We've lowered South American production guidance and now expect to produce approximately 945,000 to 980,000 equivalent ounces at a slightly higher cost of sales of $650 to $675 per ounce.

In West Africa, we've slightly lowered the top end of the production range and now expect to produce between 440,000 to 480,000 ounces at a higher cost of sales of $685 to $715 per ounce. North America's now expected to produce 625,000 to 645,000 ounces at $625 to $685, an increase in production from our previous guidance. Cost estimates remain the same.

We have increased our production guidance for Russia while we now expect to produce 555,000 to 575,000 ounces. Cost of sales guidance remains unchanged at $395 to $435 per ounce.

Overall, we are pleased with operational performance during the quarter, particularly given the inflationary cost environment the industry is experiencing with upward pressures on foreign exchange, energy prices and higher royalties from rising gold prices.

I'll now turn the call over to Paul for discussion of financial results.

Paul H. Barry - EVP and CFO: Thank you, Brant. Third quarter revenue was $1.1 billion driven by consolidated sales of 670,000 gold equivalent ounces. Third quarter attributable production was 648,000 gold equivalent ounces, a 13% increase from the third quarter of 2010. Third quarter attributable production cost of sales were $634 per gold equivalent ounce. This is an increase of 23% year-over-year, which is mainly due to increases in labor costs, energy costs, and royalties.

By-product cost of sales was $593 per ounce. Q3 attributable margin increased to a record $1,012 per ounce, up 50% from the same quarter last year while the average realized gold price increased 38%.

Third quarter adjusted operating cash flow increased by 82% quarter-over-quarter to $421.6 million. On a per share basis, adjusted operating cash flow per share was $0.37 per share, a 23% increase from Q3 2010.

Third quarter adjusted net earnings were up 134% to $273 million or $0.24 per share compared to $116.8 million or $0.15 per share in the third quarter of 2010.

Turning to our balance sheet, Kinross continues to maintain a strong liquidity position, providing a solid platform to finance our growth program. In August, we took advantage of favorable debt market conditions and the lowest U.S. treasury rates in history to secure funding for Kinross capital expansion program for the $1 billion inaugural U.S. debt offering. The offering consisted of a three tranche $250 million principal amount of 3.625% senior notes due 2016, $500 million principal amount of 5.125% due 2021 and $250 million principal amount of 6.875% due 2041. Kinross received investment grade ratings with stable outlook from all three major rating agencies in connection with this offering.

Cash and cash equivalents at September 30 were approximately $1.9 billion.

Kinross has never been in the stronger financial position and we are confident in our ability to fund our growth objectives through a combination of this existing cash balances, operating cash flow, project financing and available debt capacity without issuing new equity.

I'll turn the call over to Ken for a review of our growth projects.

Ken G. Thomas - SVP, Projects: Thank you, Paul. In the third quarter, Kinross continued to make steady progress on all of our projects and capital spending remains on track for the year. Key project development activities at Tasiast are proceeding on schedule. Work on the feasibility study remains on schedule for expected completion at the end of the first quarter of 2012. Production start-up is targeted for mid-2014.

As Tye mentioned, with the approval of the yearly works EIA, mobilization of the construction contractor is underway. This allows for early earthworks and concrete foundations for the mill and ongoing on-site power plant, interim expansion of the existing water supply system to meet construction and current operational requirements, construction and operation of the initial phase of the new tailings facility and an expansion of camp facilities by 6,600 additional beds.

Basic and detailed engineering is continuing on the 60,000 tonne per day process plant and associated process infrastructure facilities. Equipment ordered during the third quarter includes two concrete batch plants and associated crushing and screening plants, and also the first phase of the power plant including three gas turbines for the combined capacity of 120 megawatts.

Capital commitments to the end of September for mining, processing and power generation equipment totaled $782 million, with commitments expected to be approximately $1 billion by year-end. Total actual spending by year-end is expected to be approximately $400 million. Construction of the Piment and West Branch dump leach pads and ADR plant have been completed on budget and schedule and are currently being commissioned.

At Paracatu in Brazil we have started pre-assembly of the fourth ball mill with mill installation expected to commence in December. The fourth ball mill is scheduled to be operational in the third quarter of 2012 as envisioned by the mine plan.

At FDN, development of the underground exploration decline is ongoing and on target for completion in 2013. The feasibility study is expected to be finalized by year-end 2011, and we continue to target start-up of the project in late 2014.

At Dvoinoye, development of the exploration declined and construction of surface facilities had advanced on schedule, and procurement and engineering activities are also proceeding on target. The feasibility study is on schedule for expected completion in the first quarter of 2012, and processing of Dvoinoye ore remains on target to commence in 2013.

At Lobo-Marte, drilling for the feasibility study is now complete, and we will be redeploying drills to exploration programs at the Valy and Marte Northwest targets. We have completed geotechnical and mine block models and metallurgical plans are targeted to completion in quarter four 2011. Project permitting remains on schedule and the project feasibility study are on schedule for completion in the fourth quarter of 2011. We are targeting construction start-up on quarter four 2012, with project commissioning targeted for 2014. Additional detail can be found in yesterday's news release.

I'll turn the call back over to Tye for some final comments.

Tye W. Burt - CEO: Thanks, Ken. Kinross's strong operating and financial performance continued in the third quarter, delivering record revenue and adjusted cash flow as well as record adjusted net earnings and margins.

We continue to advance our drill programs at Tasiast which continues to confirm our confidence in the mineral resource there. We're also making good headway advancing both our at-site and new development growth projects.

Overall, we are focused on building our new projects and optimizing existing operations to deliver the growth from 2.6 million ounces to 2.7 million ounces of gold production this year to 4.5 million to 4.9 million in 2015.

We have a strong growth profile with peer precious metals, cash flow from 10 operating mines that we're using to build our gold projects. Our strategy is simple and clear to provide investors with cash flow per share growth from our portfolio of pure gold assets to generate long-term exploration opportunities and to drive that growth in a rock solid balance sheet.

Thanks for listening this morning. I'd like to open up the line for questions, operator.

Transcript Call Date 11/03/2011

Operator: John Bridges, JPMorgan.

John Bridges - JPMorgan: Congratulations on the results. You can probably guess what I'm asking about. It's that old drill hole underneath the Piment pit and I just wondered if there was any sort of schedule from Glen as to when we can expect news on what is underneath that thing?

Glen Masterman - VP, Exploration and Chief Geoscientist: John, it's Glen here. We are currently drilling the target at present and as we ramp up the infill drilling program (we'll be able) to put more rigs to accelerate exploration of that area. To-date, we have encouraging results indicating that the structural and stereographic position is mineralized along strike from West Branch. So we're feeling excited about that but we also have a lot of technical work to do and a lot more drilling ahead of us. So, as I said, we'll be accelerating this program through the fourth quarter and into 2012.

John Bridges - JPMorgan: You managed to get some rigs back from the infill drilling, did...

Glen Masterman - VP, Exploration and Chief Geoscientist: That's right, yes.

John Bridges - JPMorgan: Then the C67 drilling, next year what appears be heap leach material and then some higher grade material, what do you think is going on there and what could that be?

Glen Masterman - VP, Exploration and Chief Geoscientist: John, C67 is a different style of target and as you say, there is both an oxide opportunity and a sulphide opportunity. The style of target, we're starting to understand it's a different geological host rock and it's also something that we would in these types of greenschist-style succession expect to see. So, different styles of mineralization in different types of host rock. So, as we continue to build information on this target and on others in the (district) we sort of fully expect to see these things develop. Now we put some core drills on to it. All the previous drilling was reverse circulation. The core drills have gone onto it, so that we can start to understand the geologic controls on grade distribution, the geometry of the ore body and this information is going to help guide the exploration program through the fourth quarter and again into 2012.

John Bridges - JPMorgan: So there will be a detailed sort of write-down on what's going on particularly under the Piment with the Q4 results?

Glen Masterman - VP, Exploration and Chief Geoscientist: We'll determine that when the information comes along. What I can say is that we're actively drilling it right now and we'll be talking about those results in early next year.

John Bridges - JPMorgan: Congratulations everybody.

Tye W. Burt - CEO: Thanks, John.

Operator: Barry Cooper, CIBC.

Barry Cooper - CIBC: Just following up a bit on that. Glen, just wondering, how excited should we get about material that's sub-two gram that's what I assume is around 750 meters below surface, assuming those are 60 degree holes. Just wondering, how much can you suck down that pit to get that to those levels if indeed you can?

Glen Masterman - VP, Exploration and Chief Geoscientist: Barry, it's a little too early to tell at this point. You're absolutely right, those intersections are very deep. We have a full drill program planned to test the sort of the full extent of that area, which also means bringing it back towards the surface as far as we can track it. These results are encouraging. They're not the new ore body yet, but we're encouraged by the fact that this position is mineralized further along strike. So, it's again proving the concept that the target opportunity along strike is real. As I mentioned a moment ago, a lot more work to do in terms of trying to vector into the next potential ore shoot, and obviously we'd wanted Piment down as close to surface as we can possibly get it.

Barry Cooper - CIBC: Then a question for Brant – or I assume Brant. Talk about Kupol, where your part of the shortfall in production whatnot increased ground support. Obviously, we've just gone through the summer situation and typically in the past sometimes that's given you problems vis-a-vis the falling and whatnot. Has that problem basically resurfaced, which was an issue a couple of years ago?

Brant E. Hinze - EVP and COO: Yeah, Barry, I would say that if you look at the overall grades that we're seeing year-to-date and that you see in the press release, it's pretty consistent with expectation. We have experienced volume effects in the past and what we did to compensate for that is we've increased and improved our ground support systems. We brought in new equipment on last year's winter road, which I think are – if we have the machines assembled and they are working underground today and I would say that we are seeing positive effects from the increase and improved ground support systems that we have. I think the volume in the summer months will always have and we have mitigated to a degree that impact with the improved ground support systems.

Barry Cooper - CIBC: Does that cause extra dilution when you run into that situation?

Brant E. Hinze - EVP and COO: One would look at it and theoretically say that it does, but I would say at this point right now, we haven't seen any significant dilution impacts from that. It's more of a (sprawling) effect from the hanging wall and it's – I wouldn't characterize it as a large groundfalls that would impact the overall grade from a dilution standpoint.

Barry Cooper - CIBC: Well, I guess regardless we're into November and then also a lot of those problems disappear for at least six or eight months, I suspect?

Tye W. Burt - CEO: Correct.

Barry Cooper - CIBC: Okay, that's all my questions.

Operator: George Topping, Stifel Nicolaus.

George Topping - Stifel Nicolaus: Tye, could you elaborate on the FDN progress, whether any royalty or tax rates have been agreed and indeed if you've signed any documents with the government so far?

Tye W. Burt - CEO: George, we have not signed documents yet. The negotiations with the government are – we are making progress. The terms of the negotiations are of course confidential so we can't disclose any particular numbers yet, but we are closing the gap on things like royalties and tax rates and so on. The negotiations have been tough. The range is narrowing; they are not done yet, but we'd expect to see progress there over the next 30 to 60 days, and depending on the timing of the investor protection agreement negotiations and the government itself. So, I would say, in summary, progress not done yet, stay tuned.

George Topping - Stifel Nicolaus: Then secondly on Pompeya, just question on the – what's the average grade with (steps) et cetera that you've had on the drilling to-date?

Tye W. Burt - CEO: I'll ask Glen to calculate. I am not sure we can give details.

Glen Masterman - VP, Exploration and Chief Geoscientist: Yeah, that's right. It's too early to start to talk about the average grade of Pompeya. Again, there is – we really only have 20 drill holes into the target. A lot more work to do to fully delineate the size (or extent) of the body and obviously infill drilling to understand geometry and grade. So, more work to do and a little bit too early to start to expect why…

George Topping - Stifel Nicolaus: I was thinking the average outflow was 20 holes?

Glen Masterman - VP, Exploration and Chief Geoscientist: Well, the average of the 20 holes are published in the back of the press release, so the calculations can be made by studying that information.

George Topping - Stifel Nicolaus: Just lastly on the Tasiast, the gas generators, the two fuel generators that have been bought from Tasiast, we have a comment on the early indications for the economics of gas deliveries to site?

Glen Masterman - VP, Exploration and Chief Geoscientist: No. We are still in negotiation at this point in time with the Banda field owner which is Tullow and we are still negotiating what is an acceptable price with the gas field supplier.

Tye W. Burt - CEO: Bottom line, George, the Banda Field is owned by Tullow out of the U.K. There is substantial gas reserves there, but we'll have to complete negotiations and discussions to finalize a price, a contract and timing.

Operator: David Haughton, BMO Capital Markets.

David Haughton - BMO Capital Markets: Following on from Barry's comments about Kupol, perhaps Brant could give us an idea as to what the capacity is of the underground to pick up the slack, given that 2012 oil will only be sourced from the underground. Is there a potential for that to step up to the 2,800 tonnes per day kind of level?

Brant E. Hinze - EVP and COO: Yeah. We have ramped up Kupol recognizing in anticipation of finalizing the open pit operations. So, we've brought in the extra equipment necessary to do that, trained the additional people necessary to accomplish our production rate and are now doing that.

David Haughton - BMO Capital Markets: As far as the grade goes, this quarter appears to be a bit of a dip in grade, obviously going through the depleted part of the open pit. But I would suspect that the underground was also a little bit off the mark as well. What should we be thinking about for a reasonable grade going forward into 2012?

Brant E. Hinze - EVP and COO: I don't want to give any numbers. We're not in a position to give any numbers for 2012 at this point right now. But going forward, as anticipated, the Kupol grade will continue to reduce down to expected life of mine grades. The one thing that I will mention here as well, if we look at the development of the Dvoinoye operation, as we develop that and bring that into operation, we will see that grade supplement, the Kupol grade as well. So we're on track with the Dvoinoye development and we should see some of the first production come out of that in the second half of 2013.

David Haughton - BMO Capital Markets: I guess the whole idea there is to top the mill open and I'm presuming that you might be able to get as much as 4000 tonnes a day at the mill once you've got both Kupol and Dvoinoye operating?

Brant E. Hinze - EVP and COO: Yeah and we're still looking at the upgrades to the mill but we'll certainly get a larger mill throughput with some minor upgrades to the mill. So we expect to be in excess of where we are today. We're still working through final numbers, but it will be a higher throughput than what we see today.

David Haughton - BMO Capital Markets: Switching back to Tasiast now, so that you've got approval to move ahead with the ones 120 megawatts power station or power facilities, is that enough get you going once you get to the full-scale? I was of the understanding it was somewhat higher requirement to power?

Ken G. Thomas - SVP, Projects: Ken Thomas here. What we have done is we have purchased the gas turbines themselves which is 120 megawatts. The power draw expected on Tasiast is approximately 140 megawatts. We are still negotiating with GE what the appropriate combined-cycle is to go with those three gas turbines. So, the gas turbines are the longer delivery and we will have those delivered, and in the meantime, we have time to understand what we need with the gas to combined-cycle, so the combined-cycle will be the addition to the 120 megawatts.

David Haughton - BMO Capital Markets: Now, a very big commitment already to the CapEx billion dollars by the end of this year, but the cash component outlay would be about 400 (mil). I presumed that that's all to long-lead items in. The queues are getting longer for some of this material. We heard from Goldcorp the other week that it was as much as two years to order a big truck. Are you coming up to any of those kind of lead-times extending now that you are in the order situation?

Ken G. Thomas - SVP, Projects: We have placed orders quite a while back on the critical items such as a said SAG mill trucks and the most recent we have done is secure a catering contract and most importantly the general contractor for site. Yes, lead-times are extending. We, in our particular case, have been proactive and we've secured what we need at this point in time in the long-lead item. As we move forward, we will purchase such items as or secure such items as agitators, pumps, but the major equipment such as the mills and the mining equipment have been secured.

David Haughton - BMO Capital Markets: Thinking about the CapEx ahead, obviously still I look to Q3, but should we be thinking for 2012, '13, '14 in the order of $900 million to $1 billion per annum as your typical kind of spend right?

Tye W. Burt - CEO: It's Tye. I would say, David, that it's likely to be higher than that in the '12, '13 timetable, but we'll give more precise numbers at our Q1 guidance call. So, we would not expect it to be lower than 2011, especially next year when we were at full throttle on Tasiast and then as we get into 2013 FDN and Lobo-Marte ramp up. So, I think the $900 million would be low, but we'll give detail when we come up to January.

David Haughton - BMO Capital Markets: Then I guess lastly thinking about Chirano, it took a while to get into the higher grade portion of Akwaaba that was the commentary in the report, I presume that's getting into that low grade material. What are your thoughts about exploiting underground below exiting pits? Is that part of the development plan for that asset and what kind of timeline would you have in mind there?

Brant E. Hinze - EVP and COO: We're developing the Paboase as you know. So, that is an ongoing development project in Chirano. But in addition to that, we have exploration programs that are targeting potential opportunities underneath some of our open pit operations there. Glen can probably speak a little bit more to those targets, but at this point right now certainly we're optimistic that we'll continue to see progress in our drilling programs in that additional underground operations.

Tye W. Burt - CEO: Glen, you want to make a brief comment?

Glen Masterman - VP, Exploration and Chief Geoscientist: Yeah, very briefly. The focus of the drill program at Toronto right now is the discovery of new underground ore shoots, and the program has concentrated on looking for these new opportunities under the existing pit, so that will be an ongoing program into next year.

Operator: Stephen Walker, RBC Capital Markets.

Stephen Walker - RBC Capital Markets: Just again at Tasiast, Tye more importantly I guess when we were at this project in the spring we were expecting the Mauritanian government to come out with the new mining code at some point earlier, I guess this summer. I am just curious is there any update on where the Mauritanian mining code stands at this point?

Tye W. Burt - CEO: There is an existing mining code and we do not expect a so-called new mining code. What I think the minister was referring to was the trial balloon last year on potentially higher royalty adjustment and potential Ghana-style carried interest. Neither of those legislative initiatives have proceeded yet, but the crucial point, I think, Stephen, is that our existing mining license for Tasiast and for that matter extending north to C67 are all included in the grandfathered currently existing stability and mining regimes. So, we are comfortable that Tasiast and the expansion are included in that. So, no further development there yet that we've seen.

Stephen Walker - RBC Capital Markets: Maybe just a question for Ken. With the feasibility study expected at the end of the first quarter 2012 for Tasiast, Ken, what percentage of the detail engineering drawings and work do you expect to have been completed by that time?

Ken G. Thomas - SVP, Projects: At the moment, we're at about 14% engineering and typically engineering firms foresee that somewhere around 4% a month. So we're looking at, at the end of the cut-off, somewhere between 30% to 35% engineering.

Stephen Walker - RBC Capital Markets: Just as a follow-up, what degree of covenants does that give you with respect to capital cost estimates? I know a lot of the more expensive long lead time items have been locked in, but when you look at earthworks and other cost over the next couple of years, at that level of detailed engineering work, what is your level of confidence on the capital number once it is announced?

Ken G. Thomas - SVP, Projects: We've done quite a bit of early purchases and they – as you can see, we've secured about $780 million worth of commitments. So that's roughly close to a third when you put in the contingency. We know what the contingency is, so you add the contingency in and the major items in front of us now are the construction contract with regards to civil, concrete and structural steel. What we've done is, we have done a direct hire with a construction contractor very well experienced in the Middle East, in fact, globally and we have unit rates from that contactor and we are, at this point in time, understanding how that effects our budget and the forecast going forward. To answer your question, we've got about 33% of our commitment secured and the direct hire gives us greater degree of confidence and we've checked the unit rates. So with regards to the quantities, those are at the moment being rechecked. We've taken them off as the material quantities. So we're somewhat confident with regards to the path forward.

Stephen Walker - RBC Capital Markets: Just one last question for Glen on the expiration at C67. This is near surface material. Presumably is oxide? Or do you know enough about the metallurgy to determine sort of what the next steps are for this material and what do you think the potential of adding it to the front end of the plant at this stage maybe – front end of the mine plant – excuse me – the expanded plant?

Glen Masterman - VP, Exploration and Chief Geoscientist: Steven, it's too early to tell in terms of what, say, are oxide, sulphide mix is going to be, what the average grade is. I mean we're still drilling the target and as we build our knowledge then we'll be idle to plug that into sort of the overall scope of the project. But one thing I can say is that we are anxious to bring in as much information as we can quickly and so we'll be accelerating exploration off the target.

Operator: Greg Barnes, TD Securities.

Greg Barnes - TD Securities: Ken you've pushed out the start-up of Tasiast slightly to mid-2014. What's causing you to do that?

Tye W. Burt - CEO: Actually Greg, we haven't. It's Tye. There is no change intended in the timing. We're saying first half of 2014, we're on or ahead of schedule currently, so we have no reason to change that and we're on track today.

Greg Barnes - TD Securities: Secondly, Banda gas fields, I haven't heard that, so I was just wondering where it is?

Tye W. Burt - CEO: It's offshore close to Nouakchott, so east obviously of the coast of Mauritania in the southern half of the country. Tullow Oil is the developer there and working on potential pipeline to shore; about 1 trillion cubic feet of natural gas been discovered so far.

Greg Barnes - TD Securities: It is not developed yet?

Tye W. Burt - CEO: It is not. They're using it to – in some of their oil exploration in the same sector, but not developed so far, but would be rapid to develop, I would say.

Greg Barnes - TD Securities: Yeah, I have no idea how long it takes to develop those things. So, do you have a kind of timeframe that you'd expect?

Tye W. Burt - CEO: Paul, do you want to speak to that.

Paul H. Barry - EVP and CFO: Well, we would expect it to be available at our production period.

Tye W. Burt - CEO: The current contemplation would be within the next three years.

Paul H. Barry - EVP and CFO: Yeah, we understand they're using natural gas for enhanced oil recovery and so they would need to complete it for gas production.

Operator: Patrick Chidley, HSBC.

Patrick Chidley - HSBC: So, a quick question on the natural gas electricity generation there. Will that lead to a lower capital number for the project? I think you mentioned maybe that the HFO would have been more capital intensive?

Tye W. Burt - CEO: We'll determine that with a feasibility study, Patrick, but our base case up till now has been HFO on-site. We're still working our way through the all-in cost and of course there is couple of size to that, both the turbines and the generation station, and then we'll need either a gas pipeline to bring gas to site or transmission line if we build the generator station closer to the source. So, bottom line in all of that, similar capital numbers, not greatly variant, but may include transmission or gas transmission. So, that's work in progress and to be determined with the feasibility.

Patrick Chidley - HSBC: So, you would actually fund the gas pipeline that wouldn't be the seller? Would be the government or Tullow Oil...

Tye W. Burt - CEO: All up for discussion, and of course the reason for considering gas is the potential to lower our operating cost at the site in terms of (cents) per hour.

Patrick Chidley - HSBC: Just one little quick follow-up; most of my questions have been answered already, but at Kupol do you have a large stockpile owned? Can you tell us how big it is what the grade is?

Brant E. Hinze - EVP and COO: We do have a stockpile. Its lower grade than average underground mine grade and what we have been using the stockpile for is to supplement mill capacity. So, with the stockpile size, I don't have the figure in front of me, but we can certainly get that to you afterwards.

Tye W. Burt - CEO: We'll do get back on that, Patrick.

Patrick Chidley - HSBC: So, just wondering whether the underground going from one quarter to the next is going to be able to ramp-up that quickly?

Brant E. Hinze - EVP and COO: Yeah, I mean, we planned for it so we have the headings open, we have the people, we have the equipment, so we're in the process of that ramp-up and have been for the year.

Operator: Tanya Jakusconek, Scotia Capital.

Tanya Jakusconek - Scotia Capital Inc.: Most of my questions have been answered, but maybe if I could just get a bit more clarity on what exactly has happened at the SAG mill motor at Paracatu, and then just as we go into Q4, the cost for Q3 were a bit higher than I was anticipating. I appreciate that we've only been one month into Q4, but are we starting to see some of these costs come down as we've accessed some of the higher grades in some of these mines?

Tye W. Burt - CEO: Brant?

Brant E. Hinze - EVP and COO: Yeah. The first question on the SAG mill, we did have a falter ground on one of our winding, and there was a couple of hundred of them in there. The manufacture is on site and we're going through the repairs right now, and it doesn't appear at this point to be anything that we would consider material by any means. Repairs are underway and we expect to see everything back in operation within a week.

Tanya Jakusconek - Scotia Capital Inc.: So how long would we have been down – for two weeks or so?

Brant E. Hinze - EVP and COO: Yeah, roughly two weeks.

Tanya Jakusconek - Scotia Capital Inc.: You have all the pieces on site that can be done within the next week?

Brant E. Hinze - EVP and COO: We do, we do.

Tanya Jakusconek - Scotia Capital Inc.: Okay.

Tye W. Burt - CEO: Q3 costs.

Tanya Jakusconek - Scotia Capital Inc.: Yeah, as we go into Q4, yeah.

Brant E. Hinze - EVP and COO: As we go into Q4 we did experience a little bit lower grades and a little bit lower recoveries in Q3, mainly because of the positioning in the pit. We have worked through that and we're back into some of the higher grades for the fourth quarter in the Paracatu pit. So I would expect to see a little bit better performance in Q4 than Q3.

Tanya Jakusconek - Scotia Capital Inc.: Just generally overall as the portfolio, I think, I was asking?

Tye W. Burt - CEO: Yeah, I think it's – we made it pretty clear, Tanya, that we're staying on our guidance…

Tanya Jakusconek - Scotia Capital Inc.: I think you said mid range of that $565 to $610?

Tye W. Burt - CEO: Yeah, approximately middle of the range. So we're feeling good about that. We did give more precise adjustments both up and down at the various regional guidances. But overall, staying on our guidance and as we said approximately middle of the range.

Tanya Jakusconek - Scotia Capital Inc.: You've seen that improvement in October?

Paul H. Barry - EVP and CFO: To be clear, we wouldn't have stuck on our guidance if we didn't intent to. So, we're on it.

Operator: There are no more questions at this time. I'll turn the conference back to Mr. Burt.

Tye W. Burt - CEO: Thank you. We had another strong quarter of operating and financial results and with performance year-to-date, we believe we're well positioned for 2012 to unlock the value from those projects by advancing them to a stage where we can show you concrete and steel coming up (over) the ground and operations continue with very strong performance. So stay tuned. Thank you for your attention this morning.

Operator: Ladies and gentlemen, this concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.