Newmont Corporation (NEM) Q4 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. Welcome to the Goldcorp Inc. Year End 2014 Results Conference Call for Thursday, February 19, 2015. Please be advised that this call is being recorded. I would now like to turn the meeting over to Mr. Jeff Wilhoit, Vice President, Investor Relations of Goldcorp. Please go ahead, Mr. Wilhoit.

Thank you, Melanie, and welcome to the Goldcorp fourth quarter earnings conference call. Among the senior management in the room with me today are Chuck Jeannes, President and Chief Executive Officer; Lindsay Hall, Chief Financial Officer; George Burns, Chief Operating Officer; and Russell Ball, Executive Vice President, Corporate Development and Capital Project. For those of you participating on the webcast, we have included a number of slides to support this afternoon’s discussion. These slides are available on our website at www.goldcorp.com. As a reminder, we will be discussing forward-looking information that involves unique risks concerning the business, operations and financial performance and condition of Goldcorp. Forward-looking statements include, but are not limited to, statements with respect to future metal prices, the estimation of mineral reserves and resources, the timing and amount of estimated future production, costs of production, capital expenditures, and costs and timing of the development of new deposits. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from those expressed or implied by such forward-looking statements. Accordingly, you should not place undue reliance on forward-looking statements. With that, I will now turn the call over to Chuck Jeannes, President and CEO.

Thanks, Jeff. And thanks, everyone, for joining us today. I know it’s a very busy week for you. Since we already released our fourth quarter production and costs in early January, we’ll be brief in our recap of last year and focus more on forward-looking information. As we released, Goldcorp ended 2014 with double-digit production growth coupled with declining costs. Gold production in the fourth quarter was a record 890,900 ounces at all-in sustaining costs of $1,035 per ounce. It’s important to note that cost in the fourth quarter were impacted by a non-cash write down of the heap leach inventory of Los Filos that was not adjusted out of earnings. Our adjusted quarterly revenues totaled $1.1 billion with strong adjusted operating cash flow of $337 million. The reported net loss of $2.4 billion was due primarily to non-cash after-tax impairment charge of $2.3 billion of Cerro Negro that we previously disclosed in January. I want to reiterate that this is an accounting charge and does not reflect losses of gold ounces in the ground or our expectations for this asset. Quite the contrary, we continue to believe Cerro Negro will be a cornerstone operation for Goldcorp for a long-time to come. 2014 was a transformational year as we brought two new mines in the production that contributed to a record gold production of 2.87 million ounces, an increase of 11% over the prior year. We came in slightly below production guidance, but all-in cost was very strong and below the low end of our guidance range even with the Los Filos inventory write-down. On balance, it was a strong year despite the unexpected operational issues we had at El Sauzal and Los Filos. And above all else, we delivered high quality gold production more safely than ever with zero fatalities and our lowest injury frequency rates in the company’s history. The cost improvements resulted in lower all-in sustaining costs for the year were driven by contributions across the board under our operating for excellence program, which resulted in cash flow benefits of approximately $280 million. Our declining cost profile going forward will be anchored by additional low free wins as well as growing contributions from our new low cost mines. Overtime, Goldcorp has been a very proactive manager of its asset portfolio and the transactions we’ve done over the last year had reinforced that position. We divested Marigold last April and Wharf in January. The closing of which is expected tomorrow and I would like to thank the great team of work for their contributions to Goldcorp over the years and wish them success with core. Looking forward, we’re excited about the pending acquisition of the Borden Lake gold project near Porcupine, which will allow us to leverage our strong team in infrastructure in the area. A key objective in 2015 is on reserve replacement. While we were unsuccessful in that regard this year, this is a matter of timing more than anything else. We have a number of exciting exploration developments throughout the portfolio that leave us well-positioned for gold reserve growth in the year ahead. Commenting briefly on the guidance we issued on January 12, production is expected to increase approximately 20% to between 3.3 million and 3.6 million ounces with lower all-in sustaining cost of between $875 and $950 per ounce. It’s early in the year, but I’m happy to reconfirm those expectations. The ramp-ups at Cerro Negro and Éléonore are weighted to the second half the year and metal grades at Peñasquito are expected to be lowest in the first quarter consistent with the commencement of the new pit phase. So I want to remind you that our production profile was waited to the back half of the year. In other words, don’t just take our overall guidance and divide by four. With the essential completion of our two new mines, Cerro Negro and Éléonore, our capital spend is forecast to decline dramatically this year by over 40% to between $1.2 billion to $1.4 billion. This is very exciting for our Goldcorp’s investors as we’re now positioned for a sustained period of free cash flow generation even at $1,200 goal. In discussing our five-year guidance with investors over the last month, our frequent question has been about Goldcorp’s production profile beyond 2017. While we remained focused on generating strong free cash flow from our portfolio of robust young mines, we also continue to identify organic opportunities within the portfolio that have the potential to contribute future cash flow growth. At Peñasquito, both the CEP and Pyrite Leach projects continue to demonstrate potential to enhance the production profile and overall economics of the mine. Also at Peñasquito, we’re now examining Camino Rojo as a potential satellite operation. Upon successful completion of the probe acquisition, we’ll be focused on studies to integrate the Borden project with our operations at Porcupine. In a Red Lake, the proximity of the recent HG Young high grade discovery to our existing infrastructure could also have a positive effect on our production profile in the medium-term. As with all potential growth opportunities, both within outside the company, each project must compete for capital and demonstrate strong financial returns. Goldcorp is in strong position to pursue this opportunities, when we look forward to sharing our progress with you in the months ahead. So if I can summarize, we saw a lot of accounting noise with the yearend financials, as Lindsay will walk a through. But we remain focused on key deliverables that I believe make Goldcorp’s present and future so strong. Growing production and declining all in sustaining cost this year and going forward. And that will drive free cash flow to support the only BBB plus rated balance sheet in the business, which slightly just with the ability to finance and outstanding portfolio of organic opportunities with strong potential to sustain our business well into the future. Now that may sound simple, but we all know it wasn’t easy getting to this position and I can show we are all 100% focused on executing with this portfolio and delivering value for our shareholders. So with that, I’ll turn it over to George.

Thanks, Chuck. Goldcorp’s mines delivered fourth quarter gold production of 890,900 ounces, at all-in-sustaining cost of a $1,035 per ounce. Production for the year totaled 2.87 million ounces at all-in-sustaining cost of $949 per ounce. Peñasquito, Pueblo Viejo, Musselwhite and Marlin this year particular mention for exceeding the top end of their respective safe production guidance numbers. In particular, I’m proud of the Musselwhite team, we delivered turnaround year, where a keen focus on safe production and financial discipline resulted in dramatic year-over-year 25% growth all-in-sustaining cost, so $811 per ounce. This was a busy year with the transition of Cerro Negro and Éléonore into the operations group. Cerro Negro had a strong operational start and then February 2nd and important milestone is reached with the mines connection to the Argentina national power grid. We now have cheaper and more reliable power to assist in the ramp up of this mine. At Éléonore, the tailings filter issue curtailed throughput, therefore delaying production from the fourth quarter into this year, this issue have been resolved and the mine is continuing to ramp up. Consistent with our focus on community partnerships we recently signed two important new agreements. We signed a collaboration agreement with the Wabauskang First Nation at Red Lake and we also signed a resource development agreement with four First Nation communities at Porcupine. These, of course follow our groundbreaking collaboration agreement with the Cree at Éléonore mine. We now have collaboration agreements in place that all of our – that all of our Canadian mines with First Nations, which assert aboriginal and treaty rights, Red Lake, Musselwhite, Porcupine and Éléonore. Some additional detail and new reserves and resources, our proven and probable reserves declined by 8% as a result of depletion and change in economics and engineering design with the focus on financial discipline and quality ounces. The increased the cutoff grade at a number of our sites, and this is reflected in a slightly higher overall average grade. Continue drilling at Éléonore successfully converted almost one million ounces from resources to reserves, and converted 1.3 million ounces of inferred to measure in indicated resources. Expiration drilling in 2015, we will continue to focus on the lower mines, southern portion of the ore body to transfer additional resources to reserves. The increase at Éléonore was offset by a decrease at Peñasquito due to depletion and a small reduction in the estimated grades in the Peñasquito, as a result of infill drilling and completion of new block models and improved our mine planning. Los Filos reserves declined as a result of mining depletion and reclassification of certain ore blocks that contain sulfuric ore to mineral resources. At Cochenour, inferred resources increased by 200,000 ounces, drilling in 2014 was focused on definition drilling for engineering design of the first development and strokes near the haulage drift. In 2015, we will continue to focus on drilling on both and below the haulage drift to support mine ramp up and into deeper portions over the process. We should see our first reserve at Cochenour with our 2015 yearend research statement. Reserves were calculated using a gold price assumption of $1,300 per ounce. To give you an idea on sensitivity to changing gold prices at a $1,100 per ounce overall reserves are robust and would only decrease by approximately 5%. On the other hand using an increased gold price assumption of $1,500 per ounce, we would see an increase in our reserves of approximately 8%. Turning to Red Lake, safe production increased to 130,300 ounces while all-in sustaining costs decreased to $809 per ounce. Full year gold production totaled 414,400 ounces at an all-in sustaining cost of $934 per ounce. Full year 2015 production is expected to be between 400,000 and 425,000 ounces. We continue to work on optimizing the operation with the addition of Cochenour and the elimination of unprofitable ounces including those from remnant mining Campbell. At Cochenour work is continuing on several short-term studies including Jude technical assessments, backfill material handling studies focusing on infrastructure optimization. We remain on track to conduct initial scoping in the fourth quarter of this year with extensive expiration. On the exploration front at Red Lake, drilling continued to focus on extending the strike length of the HG Young discovery. Drilling on HG Young from recently rehabilitated underground Campbell headings has commenced and we’ll continue with this throughout 2015. Expiration drilling will also continue to focus on expansion of the ore zone, NXT zone, high grade zone, up plunge, and at depth and testing other targets throughout the mine. At Peñasquito, we achieved our numbers and expect an even better performance in 2015. We started a new pit phase which will impact grade in the first quarter. The grades are expected to increase throughout the year. All-in sustaining cost increased over the prior quarter due to timing of lower volumes by $349 per ounce, lower byproduct credits by $164 per ounce and higher sustaining capital expenditures by $120 per ounce. The increase in higher sustaining capital was primarily related to the Northern Well Field project. Mill throughput during the year averaged 109,400 tons per day. In 2015, we expect to continue increased throughout to an average of 115,000 tons per day and this along with increasing metal grades will contribute to a forecast increase in gold production to between 700,000 and 750,000 ounces for the year. Construction of the Northern Well Field is progressing and on track to be completed mid 2015 which is expected to meet long-term water requirements for Peñasquito. The pre-feasibility studies for concentrate and Richmond process and Pyrite Leach process were essentially complete at year end 2014 and are undergoing internal review. The two projects are being combined as I entered the feasibility study phase which is expected to be completed in early 2016. These projects continue to demonstrate potential for significantly adding value and to extend the mine life of Peñasquito. In closing, a solid finish to the year with our solid portfolio of high quality assets. We will continue to unlock further efficiencies and productivity improvement through our operating for excellence and financial discipline focus in 2015 and beyond. With that, I’ll turn the call over Russell.

Thanks, George, and good morning or good afternoon. Turning to slide 14 and Cerro Negro and Argentina, I’m pleased to announce we declared commercial production on January 1, 2015 of a strong fourth quarter with production of approximately 133,000 ounces. Production for 2015 is expected to between 425,000 and 475,000 ounces. The capital cost number for the project is still being finalized, but the estimate remains unchanged at between $1.6 billion and $1.7 billion. Production mining at Eureka and development Mariana Central continued in 2014 with production mining expected to commence at Mariana Central later this quarter. During the fourth quarter, we restarted our resource definition dwelling program with the focus at the Baja Negro and Vein Zone targets. Slide 15 shows some recent photos from the site, starting in the top left and working clockwise, the thickness, covered course or stockpile, main substation in switch yard, and finally the primary crusher. Moving to Éléonore in Quebec, first gold was report on October 1, and gold production for the quarter totaled 18,300 ounces, lower than what we expected due primarily to the tailings filter press issues as George discussed earlier. With this issue behind us in the mine ramping up, we expected produce between 290,000 and 330,000 ounces in 2015. Initial capitalize but it increased between $2 and $2.1 billion from $1.9 billion for the following reasons. Lower than expected gold sales during the preproduction period of approximately $58 million, primarily as a result of the tailings filter plan issue, the unbudgeted two months delaying expected decoration date of commercial production, which result in approximately $36 million in additional underground development cost in charge to the initial capital bucket and then acceleration of sustaining capital into the initial capital timeframe of approximately $65 million. Underground the production shaft reached a depth of 1,106 meters and sinking is expected to be completed in the second half of the year, with the shaft fully commission in the second half of 2016. The expiration ramp reached to depth of 865 meters. Slide 17, you can see the revise timeline which reflects our belief that will be in position to the great commercial production of Éléonore by the end of the first quarter. With that I’ll turn it over to Lindsay for the financial review.

Thanks, Russell. A strong finish to 2014 with record gold sales at 2.67 million ounces for the year with fourth quarter sales of 7,000 or 8,000 ounces compared to 641,000 ounces in Q3, 2014. Year-to-date ounces sold lower than year-to-date production – safe production ounces of 2.87 million. Primarily due to the Cerro Negro and Éléonore pre-commissioning ounces of 170,000 ounces which are not reported as gold ounces sold as the mines are not in commercial production in 2014. Year-to-date byproduct cash cost and all-in-sustaining costs were below our 2015 guidance at 542 or 949 per ounces respectively. Byproduct cash costs for the quarter were 589 per ounces while all-in-sustaining costs were 1,035 per ounce. Fourth quarter reported net loss totaled $2.4 billion compared to a net loss of $44 million in the prior quarter. The most significant non-cash item affecting our Q4 net earnings was the $2.3 billion or $2.83 per share, net of tax non-cash impairment charge for the Cerro Negro mine related principally to decline in the market evaluations of future expiration potential. Adjusted net earnings totaled $55 million or $0.07 per share in the fourth quarter compared to $70 million or $0.09 per share in the third quarter and was primarily impacted by lower silver, lead, and zinc revenues and higher depreciation depletion expense. I also want to point out that included in adjusted earnings $0.03 per share non-cash charge related to the Los Filos heap leach inventory write-down. To calculate adjusted net earnings, we start with our reported net loss of $2.4 billion, $2.94 per share add back of Cerro Negro impairment of $2.3 billion non-cash foreign exchange losses on the translation of deferred income tax assets and liabilities of $105 million, which was included in the tax provision and the revisions in closure costs estimates for our close mine sites of $39 million plus net derivative losses and other of $7 million. Detailed calculation of our adjusted net earnings is disclosed on page 47 and 48 of our MD&A. Consistent with previous quarters, we did not make any adjustments to the non-cash share based compensation expense, which amounts to $30 million or $0.02 per share. Our effective tax rate in the fourth quarter is 90% conclusive over a proportionate share of Pueblo Viejo and Alumbrera results compared to deferred income tax recovery on a fourth quarter earnings, which is primarily due to the tax impact on the impairment mining interest of $680 million. In addition to investment for the tax impact, to calculate the effective tax rate, the book income tax recovery of $625 billion is also adjusted for the following items. Deduct foreign exchange losses on deferred income tax assets and liabilities of $105 million add back income tax expense related to the fourth quarter earnings of PV and Alumbrera of $45 million and tax impact on the revision for the estimates on reclamation and closure costs of $70 million. Then from earnings before tax, the following adjustments are made, deduct our share net earnings of associates of $25 million. Add back share-based compensation of $30 million representing permanent differences, as these items will never be taxable. Add back earnings before tax for PV and Alumbrera of $62 million, $56 million related to revisions and estimates on reclamation and closure costs and the pre-tax impairment of mining interest of $2.98 million resulting in an effective tax rate of 19% for the quarter. Turning to provisional pricing, we had a negative $3 million provisional pricing impact at Peñasquito and a negative $2 million at Alumbrera. The provisional sales at December 31, 2014 Peñasquito include 97,000 ounces of gold priced at $1,185 per ounce, 3 million ounces of silver at $15.60 per ounce, 50 million pounds of zinc priced at $0.99 per pound, and 18.4 million pounds of led priced at $0.84 per pound. While at Alumbrera we have 20,000 ounces of gold priced at $1,187 per ounce and 19.7 million pounds of copper priced at $2.87 per pound. All-in sustaining costs for the fourth quarter of 2014 was $1,035 per ounce compared to $1,066 per ounce in the prior quarter. The decrease is mainly due to higher gold sales volume in the quarter partially offset by lower byproduct sales credits. The all-in sustaining costs for the fourth quarter of 2014 were impacted by the reduction in the carrying value of the heap leach inventory at Los Filos of $31 million. Backing out this non-cash rate down of $31 million, our fourth quarter all-in sustaining costs are close to $1,000 as anticipated. On a year-to-date basis, we achieved our all-in sustaining cost of $949, just under the low end of our guidance of between $950 and $1,000 per ounce of gold for the year. Just a note to provide 2015 guidance regarding depreciation and amortization expense, we expect expense to increased by $50 per ounce over 2014 to approximately $390 per gold ounce sold, primarily due to the Cerro Negro and Éléonore, both being in the commercial production in 2015. The company continues to generate strong adjusted cash flows from operations that amounted to $337 million or $0.41 per share. We invested $533 million at both our operating mines and projects and we had a $122 million of dividend this quarter. Of the $533 million, 44% of the spending related to our capital projects, $83 million and $151 million at Cerro Negro and Éléonore respectively. Our balance sheet remained strong. We, along with Barrack, achieved a milestone at PV, with a $1 billion, our share of $355 million of project financing going non-recourse, further enhancing the balance sheet strength. I’m confidence with the decoration of commercial production at Cerro Negro effective January 1, 2015 and Éléonore which is expected to achieve commercial production late in the first quarter of 2015 will be able to continue to build on the strength of our existing assets. The anticipated decline in capital expenditures and the strong growth in production – safe production in 2015 will generate free cash flows and positions Goldcorp well for future success and future growth opportunities. With that, I’ll turn it back to the operator, Melanie.

Thank you. [Operator Instructions] The first question is from Greg Barnes of TD Securities. Please go ahead.

Yeah, thank you. I just want to revisit the ramp-up of Cochenour. I believe if I recall correctly, looking at 40,000 to 50,000 ounces this year and you ramp-up to 2,000 tons a day by the end of – 2,200 tons a day by the end of 2016, is that about right.

Yeah, [indiscernible]. Right now we expect to get production ore out of those toward the end of the third quarter and I think somewhere between 40,000 and 50,000 for the year. And as you mentioned, we see a significant transition in Red Lake going into 2016 with Campbell being shutdown and Cochenour ramping up. I don’t believe the ramp-up is completed by the end of ’6 then I have to get back to you with that.

Okay. And the production in 2015 from Cochenour won’t be commercial. That will wait until sometime in the end of 2016 then?

Correct. I think we have right now is our assumption in the budget July 1, sometime in the third quarter of ’16 is commercial production.

Okay, okay, good. Just switching gears, Lindsay, you’ve drawn $840 million on the credit facility, do you intend to turn that into longer term debt or how do you plan that handle that?

Yeah, I think we’ll see how the year goes, Greg. And I think that rather we could term out obviously we could – but we have some initiatives underway, we have good cash flow generation depending on the gold price. One of the options to just increase the revolver 2 billion, maybe increase but we got initiatives either way and I have all the tools in my toolbox. If I need to do it, it just which one of the effective ones I’m going to use. We’ve been thinking about no decisions to make it.

Okay, sound like. Thank you.

Thank you. [Operator Instructions] The following question is from Patrick Chidley of HSBC. Please go ahead.

Hi, everybody. Just quick question, just really related to the previous one I think is have you got any assets maybe for sale that might actually be used to pay down debt?

Hi, good morning, Patrick, it’s Chuck. As you’re aware, we’ve disposed of both Wharf and Marigold in the last year and rest of our mines are all running very well and we have no immediate plans to do anything further on the portfolio.

How about the shares in Tahoe, is that something that’s I guess you couldn’t really say, how long-term is that holding?

Well, I’ll just say what I’ve said ever since that position was created is that we like the asset, but if there is a use of proceeds that would be one of the things in the toolbox that Lindsay would look at many others.

Right, got it. Okay, great. Okay, thanks Chuck.

You bet.

Thank you. The following question is from John Tumasoz of John Tumasoz Very Independent Research. Please go ahead.

Thank you very much for the presentation and the call and taking my call, excuse me. At Éléonore the inferred resource grade in 2012 annual was 10.6 grams which fell to 9.63 year ago and 7.19 today. And the reserve grade in 2013 was 7.56 grams, which felt a 6.49 a year ago and 6.30 today. Could you talk a little bit about 100 or so kilometers of drilling done in 2014 and whether the new engineering assumptions are more rigorous or the top cuts changed of the areas of influence or whether the holes were good or bad. You added 8 million tons to the total resource this year, but grades cut down a little bit a lower.

Sure. This is George, few comments. One from a geologic perspective we changed on minimum with the gross into lot of blocks to 2.5 meters. Our minimum mining width has always been 2.5 meter, so that have been impact on resource calculations. In terms of grade, we cut the infill drilling as you know well ramped up. With infill drilling we’re getting definition to be able to design actually no milestones and with that definition average grades have come down. The ore body is intact as expected but it’s been moved around a bit. Dilution is a bit higher and some of the areas and then previously expected and that’s all been deploying by the infill drilling program. You can see from our forecasted production going forward we still have a strong ramp up and we set up the infrastructure this mine to be low cost bulk material movement. We’re focused heavily now on automation and we’ve got automate it, ability to automate it, remotely run scoops and long hole drills from surface and we’re underway on a study right now to automate haulage on the levels. The grade’s dropped a bit from our expiration results but overall the ounces are there are better per vertical meter and we’re excited about this mine going forward.

Hi, John, this is Chuck. Charlie Ronkos isn’t with us in the room, but I know if he was, he would say that one of the things going on is that most of our definition drilling has been in the upper part of the mine and it’s always been anticipated that as we go deeper in this deposit, the grade gets a bit better. So we will see about that, but he is certainly holds out an expectation that as we get that deeper drilling done, we’ll see a positive grade result from that.

And actually the drilling to-date does confirm that increasing grade with depth.

Did the 494 zone, or any parts of it enter resource and could you just review how far down the new resources were defined, I know it’s a long way to get the 5,000 feet.

John, I’ll just take the one on the 494 zone, we actually weren’t able to drill it out as we had anticipated due to some excess issues on the orientation of the whole body, so we’re actually waiting for the decline to get down a little further to set up drill stations to go into the 494 zone. It’s still a target on Charlie’s list absolutely, we just – because of the angles where the holes were, we couldn’t get at it this year, but later in ’15, I believe we’re back in drilling on it.

And I would say John, in terms of the details and as to where the break is on the resource will be providing you a lot more information and detail at our future Investor Day, so you will be able to get some more information there.

Thank you very much.

Thank you.

Thank you. The following question is from Michael Gray of Macquarie. Please go ahead.

Hi guys, questions on, first of all on the HG Young, can you provide us a little bit of a roadmap on drill results being disclosed in detail and potentially a resource whether that would happen in 2015 and what we might hear at the April Investor Day.

Well, hi, Michael, I can just say that yeah, we do intend to have a fairly detailed review that is disclosed to the entire market at that time in April and then as far as the initial resource, we would normally only do that once a year with our regular resource calculation.

Right. The expectation is to have some inferred resources by the end of the year. Our focus right now is really getting the size and extent of this and we’re beginning to drill and have begun drilling from underground, but it will be an inferred resource this year.

Okay, fair enough. And is the $30 million budget on page 12, is that a 2015 budget?

Correct.

Okay, good. And just one follow-up question on Cochenour, 77 kilometers of drilling or so, how much of that was incorporated into the resource estimation update or is a majority of that really for the year end 2015 estimate?

Yeah, it was in the, yeah, I mean, a big chunk of that drilling didn’t make it in time, we cut off usually late in the third quarter in terms of what makes it in the reserve, so significant chunk of that will be in 2015.

Yeah, remember that we just got access late in the year off of that the T-drift at the end the haulage drift – drill stations and really get going on. So, most of that didn’t make it in.

Okay, great. Thanks so much.

You bet.

Thank you. The following question is from Andrew Quail of Goldman Sachs. Please go ahead.

Good afternoon, Chuck, Lindsay, George, Russell, and Jeff.

Hi, Andrew.

Two questions. One is maybe for Lindsay, a bit more technical on tax. So you guys have obviously given guidance, I think on the ’12. Lindsay, can you break that down and sort of give us, sort of why, I mean, obviously we know where, but just break that 35 down and is that something we can see going forward in the ’16 and ’17?

Yeah, two things, Andrew, 35, if you think of it we’re big in Mexico, we’re producing now in Cerro Negro. So that gets you closed to the 35, which is what we guided for 2015. I think your real answer is how do I get from 19 in the quarter to 35 and 15 and what’s happen in the quarter is that, again it’s hard for us to do, and I’m talking about 2014 quarter, hard for us to forecast what Mexican inflation is going to do or Argentine foreign exchange is going to do and that bounces around us, our actuals in the quarter. If I normalize that for Q4, I’d be right on my guidance for the year that I gave you, but it does jump to 35 primarily because of Cerro Negro being in operations in 2015.

Good job. And maybe just for you and Chuck on dividends, you guys see most years up and down, couple of big projects. Obviously into the commission production or about to be – with obviously probe was a nice acquisition to. Do you guys see as being obviously the largest gold company in the world by market these days, can you – do you see or do you envision an environment where you guys will pay a dividend that rivals other industry.

Yeah. As I said we are quite happy to be one of the few companies that have to, didn’t have to cut its dividend and we’re paying what we believe is a very solid dividend now, what the future brings is very difficult to anticipate as the chairman says, you’ve got to leave to little mystery in these things. We on a quarterly basis look at what the goal prices and what we expect going forward, how it’s moved, how it’s changed our revenues, what other opportunities we see for spending money and making value for our shareholders and then we take that all in to a mix in deciding what to do with the dividends. So like I say we are happy to have managed our balance sheet to the point that we’ve been able to maintain our dividend through this whole period of very intensive growth and capital spending and we look at our regular basis going forward.

Thanks, Chuck.

You bet.

Thank you. The following question is from John Bridges of JPMorgan. Please go ahead. John Bridges, your line is open. Please proceed with your question.

Hello, good evening. Hello?

We’ve got you, John.

Okay. My headset needs to be thrown away I think and just curious on Argentina you’ve pulled back from drilling on that tax issue. You started drilling again. What’s the status of the tax and how is operating in Argentina at the moment?

I am actually very proud of the job at the team is done the manager whole series of issues. Any new mine has a lot of startup issues and challenges. They’ve been made a bit more difficult by the financial situation in Argentina, but we managed them. We weren’t happy about seeing an impairment of our asset down there but the fact is bulk of that is market expectation of the value of future expiration potential and that will go up and down on what goes on in both the overall market and in Argentina itself. So on as far as that taxes concern, we continue to pursue our challenge legally of that tax along with other companies and at the same, we had regulations with the government and we talk to them. So it’s an ongoing process I can’t tell you what will happen today. But in the mean time we’ve gotten back in with mine definition drilling we’re not out looking for big leaps and wildcat type exploration. We’re mainly drilling just to establish the information we need to develop the mine.

Okay and financial flows in and out of the country, that’s stable and working.

Yeah, we’re fine, John. As long as you register our money going in when we built the mine which we did we can get the repayment the shareholder long time in the future dividends out of the country. We’re very compliment of that.

That’s great. Well done, guys. Good luck.

Thank you, John.

Thank you. The following question is from Pawel Rajszel of Veritas Investment. Please go ahead.

Hi, good afternoon, guys. Thanks for taking my question. Just have a few quick ones here. You guys have a strong balance sheet here. You’re starting to generate free cash flow, when I look at the probe acquisition, why not use cash instead of shares for something like that.

Well, it’s a good question and certainly one that we’ve talked lot about, our sense is that for something that is that far out and doesn’t generate immediate cash flow for us. In an environment where we like to think we know that gold is going to stay at above 1,200, but we can’t guarantee that were 100% on hedge. We felt that it was a better decision to your shares and when we look at things that have perhaps a more immediate cash flow generation picture, that would probably pushes towards cash.

Thanks for that.

Sorry, Pawel, it’s worth noting, it was a very minor dilution less than 2% as I recall of our shares. So that went into the discussion as well.

Okay, maybe couple for Lindsay. On the impairment testing, I know you guys used the 5% discount rate. Is that used across all mines, including Cerro Negro or is that kind of an average?

It’s pretty consistent across our mines that we use. And we measure that against what we would – what’s out there publicly to review, as weighted average cost of capital. So yes, in answer to – it’s across all our mines, for the impairment testing.

Just a last one on Cerro Negro, what would be assumed Argentine peso foreign exchange rate there for the impairment testing?

I think the impairment testing would be – the assumptions would be this, so the gradual devaluation going on, or strengthening of the currency exchange throughout ’15 and then in ’16 and ’17 we’d see that the currency exchange would match, what’s going on in the inflation in the country, so it comes together in ’16, ’17.

Is there a long-term rate in that case, like going beyond 2017 that you’d be able to share?

Well, I think currently, I think what you see is that the official rate is 8.65, currently held in some markets they would say that that’s closed to 13 or 14 so you can think that is with the 40% inflation going on in the country give or take the certain parts of the operating expenses, it’s got to go to 15 or 16, sorry – 12 is where we take it to it at the 16. To repeat that, so we’re using 12.

So what…

Yeah, exactly.

That’s very helpful. Thanks a lot.

You bet.

Thank you. The following question is from Adam Graf of Cowen. Please go ahead.

Good afternoon, guys. Thanks for taking my question. Maybe I missed it in the presentation, but – and I apologize, but what is the current status of El Morro?

El Morro as you know last year, we had the Supreme Court essentially suspend or renege our environmental license to proceed with the construction there and so we are somewhat back to the drawing board looking for the right way to build that mine, working very much with communities and consulting to understand what their concerns and issues are and the mine is, sorry – the project is still one that we think is very valuable and that will ultimately be developed, but there is a lot of work between here and there. Russell, anything you want to add?

Adam, it’s Russ, just an idea, in the budget, somewhere around $13 million, if memory serves for 2015.

CapEx?

Yeah and then ongoing, go ahead.

Yes. And then, on a different subject, I saw – I see that both you guys and Barrick, added a [indiscernible] to your reserve statement. And Barrick, I think, has mentioned D, and given some numbers around it, what’s been your discussion with Barrick about that project?

So I mean that the significant change on D is the heap leach isn’t being contemplated now with market conditions and there is a higher cut-off grade that would be process through their facilities. So that impacted the reserves.

Yeah. Just correct, we’ve had it in reserves last year and it was reduced this year. It’s not something with just shown up. We’ve had it in reserves for a couple years. I think and due to the conditions that George just described that reserve went down.

We took the oxide out of the reserve, put it in measured and indicate.

Correct.

Any feeling on the gold price needed to make that the outside project work?

[indiscernible] is the operator there. You’re probably better of talking to them. It’s not something that like we have a number, and we’re just waiting to it.

Alright, thanks for answering my questions.

You bet.

Thank you. This concludes today’s question and answer session. I’d like to turn the meeting back over to Mr. Jeannes.

Okay, thanks, everyone, again. I know it’s a very busy time for you. So we appreciate you taking the time to look at our materials and participate in the call. As we said, we’re quite excited about the year ahead. I think we’re fairly uniquely position to the portfolio high quality assets with the decrease capital spend, lower cost, increase production, we’re positioned to deliver free cash flow at $1200 and certainly for this year and beyond. So we look forward to updating you as year progresses. Thank you. Bye, bye.

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