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Executives

Tom Elliott - VP, Investor Relations

Paul Rollinson - CEO

Brant Hinze - President & COO

Tony Giardini - EVP & CFO

Glen Masterman - SVP, Exploration

Analysts

Brain Yu - Citi

George Topping - Stifel

Greg Barnes - TD Securities

John Bridges - JPMorgan

Jorge Beristain - Deutsche Bank

Derek Macpherson - National Bank Financial

David Haughton - BMO Capital Markets

Steven Butler - Canaccord

Anita Soni - Credit Suisse

Alec Kodatsky - CIBC

Stephen Walker - RBC Capital Markets

Sean Heberling - Marion Street Capital

Kinross Gold Corporation (KGC) Q4 2012 Earnings Call February 14, 2013 8:00 AM ET

Operator

At this time, I would like to turn the conference over to Mr. Tom Elliott, Vice President of Investor Relations. Please go ahead, sir.

Tom Elliott

Thank you and good morning. Welcome to Kinross Gold Corporation’s conference call to discuss fourth quarter full year 2012 results. With us today, we have Paul Rollinson, Chief Executive Officer; Brant Hinze, President and Chief Operating Officer; Tony Giardini, Chief Financial Officer and Glen Masterman, Senior Vice President, Exploration.

Before we begin, I would like to bring your attention to the fact that we will be making forward-looking statements during this 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, the news release dated February 13, 2013, and Management’s Discussion and Analysis for the same period and our most recently filed AIF, all of which are available on our website.

I'll now turn the call over to Paul Rollinson, CEO of Kinross Gold Corporation.

Paul Rollinson

Thanks, Tom, and thanks to all of you for joining us today. I would like to welcome our new CFO Tony Giardini to his first quarterly call. I'll begin by commenting on some of the highlights from yesterday’s announcement and making some observations on the year ahead. After that, Tony will give details on our financial results. Brant Hinze will discuss our operations and projects and Glen Masterman will give a brief update on exploration.

To help set the context for yesterday’s release and today's call, let me remind you of a few basic principles which we established when I became CEO six months ago. These are themes that run through much of what we will be talking about today. We said, we would focus on enhancing margins and free cash flow as our key priorities. We said, we would stress quality ounces over quantity in our mine planning, production, exploration and resource strategies. And we said that we would make tough decisions based on these strategic imperatives. Some of tough decisions are reflected in yesterday’s press release. By taking them, we believe we have established a solid foundation for building value and that positive results will be seen as we progress through 2013.

We finished 2012 strongly with fourth quarter production of approximately 725,000 gold equivalent ounces at an average cost of sales of $686 per ounce. On a full year basis, we produced approximately 2.62 million gold equivalent ounces at an average cost of sales of $706 per ounce. We were pleased to have exceeded our guidance on production and to have remained in the lower half of our guidance range on cost. Our number one priority in 2013 remains the same, to consistently deliver on our commitments, quarter-after-quarter.

Looking at our financial results, our Q4 revenue was approximately $1.2 billion. For the full year 2012, we achieved a company record revenue of $4.3 billion. Our adjusted operating cash flow was over $500 million for the quarter and about $1.5 billion for the full year. Our adjusted net earnings were $277 million or $0.24 per share for Q4 and $879 million or $0.77 per share for the full year. Tony will discuss our recorded earnings for 2012 and the impact of our annual impairment test under IFRS accounting rules, but I would like to make a few comments on the non-cash impairment charge that we recorded.

We conducted this year’s impairment test based on our current assumption that we will build a mill at Tasiast in the range of 30,000 tons per day, which is supported by our pre-feasibility study work today. Based on the PFS analysis, we're not proceeding with the 60,000 ton per day mill option, but instead, we're focusing solely on options in the 30,000 ton per day range. While a smaller mill would result in lower annual production than the larger option originally considered, it should also reduce capital requirements and execution risk and we believe deliver better margins and cash flow per ounce. This is consistent with the core principles of our way forward strategy.

Our impairment test on this 30,000 ton per day mill model was impacted by a number of factors, including a reduction in the valuation multiple for Tasiast and industry wide increases in capital and operating costs. The net result was an after tax non-cash charge related to Tasiast of approximately $3.1 billion. In addition, we recorded an after-tax non-cash charge related to Chirano of approximately $111 million. Obviously, we are unhappy with this non-cash charge, but the annual IFRS process and it's prescriptive methodology are facts of life that we must deal with.

We view Tasiast as a long-term asset, and our view of it's long-term potential has not diminished. As a result, we are now focused squarely on the future. We continue to believe that Tasiast remains an important part of that future based on our work today on the pre-feasibility study and on our exploration activity. We continue to be impressed by the upside potential at Tasiast, as Glen will explain in more detail, we are seeing encouraging results from step out targets outside of the footprint of the current resource. The pre-feasibility study is expected to be completed on schedule at the of this quarter and we look forward to sharing the results in April.

Now let’s review our outlook for 2013. The way forward principles have strongly influenced our budgeting and planning process, we have stressed quality over quantity in our mine planning and our operations have maintained a conservative focus on managing costs and enhancing margins. At the same time this year, we faced reality of lower grades at most of our mines which we expect will reduce overall production and increase costs. In addition, we expect to see the impact of industry wide inflation in consumables and labor costs. The net result is that we expect to produce 2.4 to 2.6 million gold equivalent ounces at an average cost of sales of $740 to $790 per ounce.

Going forward, our business planning process will continue to focus on the pursuit of value and margin. Tony will provide more detail on our production and operating cost outlook including our 2013 forecast for all-in sustaining costs per ounce which is intended to give a better picture of our total costs associated with producing an ounce of gold.

Turning now to our capital expenditure forecast. In August, when I became CEO, we launched a targeted initiative to find opportunities to reduce capital expenditures. This resulted in a reduction of $200 million in our 2012 capital forecast, bringing it down to $2 billion. Our actual expenditures for the full year 2012 came in better than at $1.92 billion, and the disciplined focused on capital continued with our 2013 budgeting, and as a result, we expect to spend about $325 million less than we did in 2012 for 2013. This includes reductions in all three categories of capital expenditure, sustaining, opportunity and growth. In all of our capital decisions we will remain focused on disciplined spending that drives margin and cash flow in line with our way forward principles.

Let me now make a couple of observations about our year end mineral reserve and resource estimate. For the first time in several years we did not increased the gold prices assumptions that we used to estimate our reserves and resources. Instead, we made a strategic decision to use the same price assumptions as we did in 2011. This decision was driven by the principal of quality versus quantity and specifically targets higher margin ounces with less capital intensity.

We do not believe in pursuing high class low margin ounces simply increase production or the size of our resource estimates. The decision to hold the line on our gold price assumptions coupled with an industry-wide escalation in costs resulted in a reduction in our 2012 year end resource estimates. Needless to say, in a lower cost or higher gold price environment, most of these ounces may still be brought back into resources; in other words, gold is still underground.

Turning to our growth projects, we have made excellent progress at Dvoinoye and remain on schedule to meet our expected delivery of first ore to the Kupol mill in the second half of 2013. At Tasiast as noted earlier, we expect to complete the pre-feasibility on schedule at the end of this quarter. At FDN, we continue our negotiations with the government of Ecuador on exploitation and investment protection agreements. We are making progress and believe we have reached a conceptual understanding in a number of key areas.

Finally, regarding exploration, we are seeing some encouraging results from our step out targets in Tasiast district and also from the Moroshka target at Kupol which Glen will address later in the call.

So to sum up, we've made a number of important decisions consistent with our strategy and established a solid foundation for building value going forward. We are pleased for the second year in a row to have delivered on our production cost and capital guidance and we remain strongly focused on continuing to meet our commitments in the years ahead.

With that, I will now turn the call over to Tony.

Tony Giardini

Thank you, Paul. Fourth quarter revenue was $1.2 billion driven by consolidated sales of 696,000 gold equivalent ounces. Fourth quarter attributable cost of sales of $686,000 per gold equivalent ounce, by-product cost of sales was $605 per gold ounce. Compared to the same quarter last year, our gross margin increased to $1,021 per ounce, up 6%.

Fourth quarter adjusted operating cash flow increased by 42% quarter-over-quarter to $501 million or $0.44 per share. Adjusted net earnings were $277 million in Q4, a 48% increase from $187 million in the fourth quarter of 2011. On a per share basis, adjusted net earnings increased to $0.24 compared to $0.16 per share in the fourth quarter of 2011.

As Paul mentioned, we completed our annual assessment of the carrying value of our cash generating units for the year ended December 31, 2012. As a result, we recorded an after tax non-cash impairment charge of $3.1 billion at Tasiast and $111 million at Chirano. The non-cash charge at Tasiast included $2.1 billion related to goodwill and an after tax charge of $965 million related to property, plant and equipment. The non-cash charge at Chirano was entirely goodwill.

Reported net loss for the quarter included a non-cash charge of $3 billion or $2.62 per share. For the full year, consolidated sales from continuing operations were approximately $2.6 million gold equivalent ounces and an average realized gold price of $1,643 per ounce. This generated revenue of approximately $4.3 billion, a 12% increase over 2011.

2012 attributable production cost of sales was $706 per gold equivalent ounce compared to $592 per ounce in 2011. The increase year-over-year was due to higher input cost for labor, energy and consumables and increasing processing of lower grade ore. By-product cost of sales was $626 per gold ounce for 2012 compared to $535 per ounce in 2011.

In 2012, our gross margin increased to $937 per ounce, a 3% increase over 2011. Adjusted operating cash flow for 2012 was approximately $1.5 billion, a decrease of 2% from 2011. On a per share basis, adjusted operating cash flow was a $1.34 per share versus $1.37 per share in 2011.

Adjusted net earnings for the full year were $879 million or $0.77 per share compared to $851 million or $0.75 per share in 2011. Reported net loss for the full year included the after tax non-cash charge was $2.5 billion or $2.24 per share.

As at December 31, 2012, Kinross has approximately $3.5 billion in liquidity, consisting of $1.6 billion in cash and cash equivalents, $350 million in short-term investments and $1.5 billion of available credit facility. As previously disclosed, up to $460 million of these funds will be used to repurchase the senior convertible notes due March 15, 2013, should holders chose to tender their notes.

Capital expenditures were $512 million for Q4 compared with $578 million in the fourth quarter of 2011. The decrease was mainly due to timing of expenditures at Tasiast. Capital expenditures for the full year were $1.9 billion, $2 billion, slightly below our revised guidance.

Looking forward, we expect 2013 production to be approximately 2.4 million to 2.6 million gold equivalent ounces. On a by-product basis, we expect production of approximately 2.3 million to 2.4 million gold ounces and approximately 6.5 million to 7.5 million ounces of silver.

We are forecasting lower production due to an anticipated decline in grades as well as the planned suspension of production at La Coipa in the second half of the year. We expect these impacts to be partially offset by the continued acceleration of a Fort Knox heap leach throughput.

We expect production in the first half of 2013 to be below the production levels achieved in the second half of 2012. Production is expected to increase slightly in the second half of the year with the commencement of processing of Dvoinoye ore and the expansion of throughput at the Kupol mill to 4,500 tonnes per day. Also contributing to a slightly stronger second half are improving grades at Chirano and Kettle River, improving grades and throughput at Paracatu’s Plant 1 and better heap leach performance of Fort Knox.

Production cost of sales is expected to be $740 to $790 per gold equivalent ounce. By-product costs are expected to be 690 to $740 per gold ounce. We are part of a World Gold Council process that is seeking industry consensus on adopting formal guidelines for reporting all-in costs associated with gold production.

While this process is ongoing, we are independently reporting an all-in sustaining cost in order to provide our investors with more detailed information on our cost structure. We have defined all-in sustaining cost as the sum of production cost of sales, silver by-product credits, general and administrative expenses, sustaining business development and exploration costs, sustaining capital expenditures and related capitalized interest as well as a portion of other operating costs.

Based on this definition, we are forecasting our 2013 all-in sustaining cost on a by-product basis to be approximately $1,100 to $1,200 per gold ounce sold compared was approximately $1,100 per gold ounce sold for 2012. Production cost for sales in 2013 is forecast to increase due to an expected decline in grade as certain existing mines and higher consumable and labor costs.

Details on assumptions used in our 2013 forecast can be found on slide 14 of the webcast along with the key sensitivity to metal prices, inputs and foreign exchange.

Capital expenditures for existing mines are expected to be approximately $760 million which includes $590 million for sustaining capital and $170 million for opportunity capital.

We expect capital expenditures of approximately $750 million relating to growth projects. This includes $625 million of Tasiast related to the completion of infrastructure work, the construction of a permanent water pipeline, purchase of mining equipment and pre-stripping. This represents our best current estimates and is subject to revision pending completion of the prefeasibility study in the first quarter.

We are expecting to spend $65 million for the Dvoinoye project, net of $20 million in forecast credits from ore mined prior to January 1 of this year and $60 million in aggregate expenditures for projects in South America. We also expect $90 million in additional capital expenditures including $80 million for capitalized interest and $10 million for capitalized exploration.

Explorations and business development expenses for 2013 are expected to be $210 million of which $160 million is forecast for exploration. Total exploration expenditures are expected to be $170 million. We held the line on general and administrative expenses which we expect to be $180 million in 2013. Other operating costs are expected to be $90 million of which $45 million are costs related to the Tasiast expansion that cannot be capitalized and $30 million of costs related to the suspension of mining of the La Coipa. Included in the above amounts is approximately $45 million in equity based compensation. We expect our tax rate to be in the range of 33% to 39% in 2013 and depletion, depreciation and amortization to be approximately $300 per gold equivalent ounce.

I will now turn the call over to Brant.

Brant Hinze

Thank you Tony. I'll be discussing what was achieved in the first quarter and full year and then provide an update to our projects. Before I begin I would like to update you on progress that we've made making that we made in making the way forward. In 2013 each operation is focused on executing its way forward plan which consists of operational improvements, targeted at the highest site specific areas of opportunity. In the area of continuous improvement, our CI projects improved cash flow by approximately $150 million in 2012.

Some of our highest impact projects included a leach pad optimization at Round Mountain, mill improvements at Kupol, improvements and process water chemistry at Fort Knox and an optimization of the flotation circuit at Kettle River-River Buckhorn. We are continuing to make progress on the area of supply chain management. Already our efforts in 2012 have secured cyanide and tire supplies which will yield savings of approximately $12 million to $15 million in 2013. Our next priority focus is granting media and explosives and we expect to have these in place by the second half of this year.

Our focus in energy management continues across all our operations. For example at Paracatu we have achieved a 5% year-on-year reduction in energy consumption at Plant I through circuit optimization. These examples provide a flavor of the progress we are making as we continue to evaluate all opportunities to reduce costs and improve margins and free cash flow. We finished 2012 strongly exceeding production guidance and achieving cost of sales in the lower half of the guidance range. I'm proud to note that this is the second consecutive year that we have achieved our operating and cost guidance.

Overall our North American operations had an excellent year, exceeding regional production guidance while costs were in line with guidance. Quarter four production at Fort Knox was higher than the third quarter as the mine entered a phase of higher grades and mill recoveries continued to be strong. Fourth quarter production at Kettle River Buckhorn and Round Mountain was lower than Q3 as a result of lower grades. Production from our South American operations was slightly below 2012 guidance while production cost of sales remained within the range.

Fourth quarter production at Paracatu improved from the previous quarters largely as a result of the fourth ball mill which was in operation for the full quarter as well as higher grades in Plant II and improved mill performance. Production at Maricunga increased in the fourth quarter as the heat leach returned a more normal operations after encountering suspended solids in the leach solutions in Q3.

Quarter four production of La Coipa increased due to better grades. As we've previously disclosed in our AIF filed in 2012, we expect to suspend operation of La Coipa in the second half of the year. We're continuing to assess the remaining reserves, resources and exploration potential at La Coipa including the future potential of La Coipa phase seven, formerly known as Pompeya.

Production and cost for West Africa were in line with revised regional guidance. Production at Tasiast declined in the fourth quarter as a result of continued variability in the gold grades encountered in the banded iron formation in the Piment pits. Chirano achieved record quarterly production as a result of mining in higher grade areas in (inaudible) underground. As part of our strategy to reduce mining cost, we're in the process of executing a planned transition to self perform open pit mining operations from contract mining at Chirano this year.

We estimate that this will reduce open pit mining cost by approximately $2 per ton as we realize savings on contract or management fees and improve fuel efficiency from the new mining fleet. This is another example of a cost reduction opportunities we're capturing as part of the play forward. Kupol had an excellent year as 2012 production exceed regional guidance and cost of sales was at the low end of the regional guidance range. At Kupol, the throughput and recoveries continue to be very strong. However, quarter four production was slightly lower than Q3 as a result of lower grades.

Moving from operations over to our projects, we continue to advance our key development priorities Dvoinoye and Tasiast. We continue to make good progress at Dvoinoye. Underground development is progressing ahead of plan with over 5,000 meters completed at year end and the permanent main ventilation fans have now been installed. Construction of the surface infrastructure and facilities is approximately 60% complete and is planned to be completed in the second half of the year.

The project remains on budget and on schedule with deferred shipment of ore to the Kupol mill expected in the second half of the year. At Tasiast we expect to complete the pre-feasibility study for construction of a mid-sized CIO mill in the range of 30,000 tons per day by the end of next month. As Paul mentioned we have made the decision not to proceed with the 60,000 ton per day mill options. We believe that a smaller mill at Tasiast offers a number of benefits which are consistent with our way forward principles. These includes the following, lower initial capital requirement, reduced execution risk, increased average margin and free cash flow per ounce, higher average grades over the first five to 10 years and lower capital stripping and sustaining capital requirements.

We expect to share the results of the pre-feasibility study in April. We completed a number of basic infrastructure improvements at Tasiast in the fourth quarter. Work is nearing completion on a permanent camp and we are making good progress on the site power station, truck shop and other facilities. Permitting, engineering and bidding for a permanent seawater supply system are progressing on schedule.

I would now like to turn to our year-end mineral reserve and resource statement. Overall our 2012 reserve and resource estimates were impacted by cost escalation and maintaining our gold price assumptions at 2011 levels. At year end, proven and probable gold reserves were approximately $60 million ounces a net decrease of $3 million ounces due primarily due to production depletion.

Reductions at Maricunga, Fort Knox and Kupol were offset by additions at Paracatu and Tasiast. Measured and indicated gold resources were $20 million ounces a decrease of approximately $5 ounces compared to 2011; the decrease was primarily related to Tasiast and Maricunga. The $4.3 million ounce reduction at Tasiast was related to the removal of ounces previously designated as heap leach production, conversion of resources to reserves and the previously mentioned grade reconciliation issues at (inaudible) as well as the higher cost in our gold price assumptions.

In third gold resources were $14 million ounces a $6 million ounce reduction in 2011. Decrease is primarily related to Maricunga where we have completed a mine plan optimization which has resulted in a shortened mine life but has significantly improved cash flow. As such the overall reduction of approximately $5 million resource ounces has had a negligible impact on the assets value.

In conclusion we had a solid quarter and strong performance for the year; our operating results reflect the strength quality of our people and our ongoing commitment to managing cost in a difficult industry environment.

I will now turn the call over to Glen for an update on exploration.

Glen Masterman

Thanks Brant. I'll speak to some of the highlights from our exploration programs in 2012. Work at Tasiast continues to confirm our beliefs in the potential of the district to yield additional development opportunities. At Kupol, our site exploration team has identified a new structure with strong potential as a result of the discovery of additional mineralization at the Moroshka target.

Beginning with Tasiast, our drilling program continue to follow-up surface geochemical and previous drill hole results at district targets north and south of the mine. Nearer to the mine drilling at West Branch South, Piment, and Prolongation tested potential extensions of mineralization below the pits. Results of this drilling have returned encouraging intercepts at prolongation in West Branch South. The new mineralization has been identified at depth.

Most of our work this year is focused on targets outside the eight kilometer footprint of the Tasiast deposit. Drilling at C67 and C68 continued to confirm the presence of narrow high grade veins at both targets. Highlights from the drilling program are illustrated on the map found on slide 23 of the webcast presentation.

In Q4, drilling transition to the Fennec target located 300 meters northwest of C67, where recent work identified strong surface evidence of issues on hosted mineralization along a structure parallel to C67. We have intersected high grade mineralization at Fennec in a number of holes and the target remains open at depth and along strike. Further drilling is underway to assess the size potential and continuity of mineralization.

At the C68 target we have identified two zones of mineralization known as C68 West and C68 East. The most encouraging results today are from C68 West where drilling has been completed along 600 strike meters and tested the structure to an average depth of 100 meters below surface. A handful of holes have traced vein shoot to a 150 meters deep where mineralization remains open down depth. Further step-out and in-field drilling is underway to examine bank continuity and assess results potential.

Turning now to Kupol, drilling in the second half of the year was completed on the Kupol West license where further high grade mineralization was discovered at the Moroshka target. Moroshka is a narrow vein shoot located five kilometers Southeast of the Kupol mill. Initial testing began in 2009 and follow-up drilling in 2011 and 2012 confirmed the presence of high gold and silver grades hosted by a quartz vein developed along at least 300 strike meters over a vertical range of 150 meters.

The geology of Moroshka is very similar to that of Kupol although the vein at Moroshka is narrower with widths varying between a half meter and three meters wide. The Moroshka vein is not yet fully delineated and there is good exploration potential to establish a resource. Although, a modest discovery, the Moroshka vein occurs at the center of a five kilometer long geochemical trend parallel to the Kupol vein. We are encouraged by the potential to discover additional vein shoots along the Moroshka trend.

An appendix of complete drill results from the targets I have discussed is available on our website. I will now turn the call back over to Paul.

Paul Rollinson

Thank you Glen. Its been a challenging time for the industry and for Kinross. And I want to again thank our employees for an outstanding quarter and a strong year. Since I became CEO six months ago, I have had a chance to visit many of our sites and I’ve been greatly impressed by the commitment and enthusiasm of our global team.

Our people have remained strongly, internally focused and have accomplished a great deal during those six short months. As I hope you will see from our remarks, we begun to execute on Kinross Way Forward and we expect to see a positive impact this year and beyond. Our expectations for 2013 reflect our strategy of stressing quality over quantity. We will remain focused on enhancing margins and cash flow. We will spend our capital prudently, be highly disciplined in building our projects and seek to optimize returns from our capital investments.

Thanks to everyone for joining us and operator I would now like to open up the line for questions.

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. (Operator Instructions) The first question is from Brian Yu of Citi. Please go ahead.

Brain Yu - Citi

The first question is just on Tasiast, I think this is the first time where you’ve mentioned that you are expecting a better unit cash margins with a 30,000 ton option. Could you expand on this?

Paul Rollinson

Sure. Thanks Brian. Good question. I’ll share the question with Brant, but essentially by pursuing the 30 option and putting aside the other comments we made about lower capital, lower execution risk what we are not doing is sourcing, we are not doing as much stripping, we are not sourcing as much material as we would need to fill a 60,000 ton per day mill. As a result, we can be more selective in what goes into the 30 in the initial years; that’s really the essence of it. Brant, may be you want to jump in on this one.

Brant Hinze

Yeah, we talked about a number of things both in the press release and our comments that we just went through. It does, certainly a 30,000 versus 60,000 does provide us with lower execution risk, lower capital, improved margins, better cash flow and it reserves optionality going forward. But looking at it from the general perspective with a 30,000 ton a day and the mining rate that we would expect to achieve, the average grade that we put through the mill versus the 60,000 ton a day would be considerably higher; not only that, but looking at the fact that on a 60,000 ton a day mill operation, as Paul mentioned, you would have to bring forward additional stripping into the life of the operation to maintain a 60,000 ton a day feed into a mill.

So looking at our way forward and looking at the fundamentals of the way forward what we have been focusing on, on the way forward and we said it many times and I am sure you will hear us talk about it many times going forward, focusing on margin, focusing on cash flow and maintaining that diligence, this fits our way forward and the way we like to continue to run the company.

Brain Yu - Citi

Okay. And my follow-up is, also in Tasiast you’re still having that grade variability there that you met, or are there any plans to process in West Branch before the expansion is complete, just to get better sense of there, not going to have the same grade variability issues?

Brant Hinze

To talk more about the grade variability issues itself, I will let Glen highlight that a little bit, but given the fact that we are currently stripping West Branch and we are encountering leach material now, we are putting that on the leach pattern we are processing that material. So the answer is yes, we are processing West Branch banded iron formation material oxide on the heap leach today. Glen?

Glen Masterman

Thanks Brant. I will follow up just on a little bit then on understanding the grade variability and the banded iron formations and we currently have a much better understanding of grade distribution in the pits and in those ore bodies and this is now reflected into our resource models and on plants. And going forward looking at the West Branch, we previously done a lot of work as we did the in-field program to incorporate a strong geologic understanding which had a strong influence on the grade model going forward, so we have hard confidence in the West Branch.

Operator

Next question is from George Topping of Stifel. Please go ahead.

George Topping - Stifel

On Dvoinoye, could you give us more information on the assumptions made for the build up for this year and next in terms of ounces and cash costs?

Paul Rollinson

Yeah, we can try to do that; I may be send that question over to Brant. Again, we are on schedule and we are on budget, high grade ore would be fed in on a batch basis in the second half of this year.

Brant Hinze

Yeah, I can touch a little bit on the Dvoinoye here. You know, certainly the Dvoinoye is a great little project there, great little operation and the project I'm glad to say as we mentioned earlier is on budget, on schedule. We are currently actively mining underground or doing the development work and the development ore that we are pulling out, we expect to process in the second, some of that or most of that in the second half of 2013.

We do have the ounces that we do produce, a portion of those ounces will actually go to as Tony mentioned offset to capital. So a credit to capital anything that was mined before January 1, 2013, anything mined in 2013 then further goes to the mill will be production ounces.

We are not expecting to see a lot of production ounces probably less than about 20,000 for the year and we did come out I think in first quarter of last year, there were some statistics on the Dvoinoye cost and production which if you would like I can reiterate those now or take that offline at a later time.

George Topping - Stifel

I would be happy to follow-up later on not today, let me more than one question and a follow-up, great thanks, and just as I said the follow-up on the sustaining CapEx I noticed South America is running a $300 an ounce. So can you give us an indication of what's in there as the main contributors and is there room for savings on going forward?

Brant Hinze

In South America?

George Topping - Stifel

Yes.

Brant Hinze

Yeah, and I think overall, that's pretty much in line what our sustaining capital is or our (inaudible) is on an ounce for the entire company but on a sustaining basis, it is true that typically our South American operation is particularly the Chilean operations tend to be a little bit higher on the striping cost but let me go back and to sustaining capital for a minute, if we look at where we were sustaining capital for 2012, and what we put in our press release for sustaining capital in 2013, we are focusing on the way forward, focusing on quality, focusing on margin.

We spent a lot of time looking at sustaining capital. So for 2013, we are actually $70 million or $90 million less in sustaining capital than we were in 2012 and a good portion of that is stripping about $70 million of that is stripping and a bulk of that is actually South America. So we have seen significant improvements as we go through the way forward, as we look at our mine plans for where we can improve on sustaining capital as well as our direct operating costs. So we are pretty pleased about that.

George Topping - Stifel

Would you expect it to fall in 2014?

Brant Hinze

You know, as you know, we typically give single year guidance and we don’t give multiple year guidance. So 2014…

George Topping - Stifel

Okay. Brant I'll follow-up offline. Thanks a lot.

Paul Rollinson

And George its Paul here, I just, there were some comments in the media last night. I just take an opportunity to clarify. I am happy to chat offline, but I did want to draw your attention to note 19 in our statements. We have a total asset value on our book for Tasiast and Chirano of $4.2 billion. We would be happy to check it around with you offline and talk a little bit more about how (inaudible) process, the testing, the calculation and what goes into it but I just thought I take the opportunity to point that out.

George Topping - Stifel

Sure, it was on interviews where the several companies mentioned that you are not alone. As you saw this morning, it was...

Paul Rollinson

No, it's absolutely. We're not happy about it but it is where we are. We're looking forward.

Operator

The next question is from Greg Barnes of TD Securities. Please go ahead.

Greg Barnes - TD Securities

Brant, Paracatu had a much better quarter. How do think that will transition through 2013?

Brant Hinze

Yeah, Paracatu did have a good quarter. And we've seen certainly, the final build out of the mill. So we did increase production in the fourth quarter as a result of having the fourth ball mill in line, but I would like to say as well to and we've talked about this on a number of occasions on previous calls but if we look at Paracatu and we look at the fact that, we have been building that thing for over three years and I have been saying that once we build the thing and starting running the thing we’ll actually be able to get that mill process stabled out and improve performance and that is actually happening. So, we have seen the team there spending awful lot of time in proving the performance of that mill and we are seeing that now begin to pay off. So performance improvements and continuous performance improvements we would expect to see that in 2013 and beyond.

Greg Barnes - TD Securities

Can recoveries get up about that 75% level?

Brant Hinze

We are working on it. We have seen some promising things to get us up above that but I can’t make any commitments and promises right now.

Greg Barnes - TD Securities

Okay and as a follow-up on Tasiast, I know you talked about getting the grade variability under control but, are there other measures you can make now to bring cost down before you start with a 30,000 ton a day expansion at the existing mine?

Paul Rollinson

Tasiast, it’s a little like where we were at Paracatu three years ago. We do have an existing mine but there is a lot distraction with construction and contractors and projects and infrastructure. The guys are clearly focused but there is a lot going on at that site.

Brant Hinze

Yeah, and it's kind of interesting because Tasiast is one of those sites where it's, when we look at the construction of Tasiast, the fact of the matter is that is actually a Brownfield’s construction project although a very large Brownfield’s construction project over the top of a reasonably small operation. That being the case, we see a lot of costs associated with for example, stripping that we can't divert to the capital project itself. So and we talked a little bit earlier about encountering ore at the West Branch, when we encounter ore, there is a transition from capital stripping then that you have to account for in your operating cost. So we are going to, Tasiast is going to be a high cost and I think a little bit of tough go until we get the new mill build out and it's just the way it is with such a huge project overlying on a Brownfield’s perspective a small producer like that.

Operator

Next question is from John Bridges of JPMorgan. Please go ahead.

John Bridges - JPMorgan

I just wondered the drill was outside of Tasiast, it seems to be populations there of mineralization and some big numbers. Glen, I just wondered if you could sort of give us a better guidance as to what you think is going on there?

Glen Masterman

Sure, John. So what we are really looking at is a number of high grade veins near the mine located on parallel trends and we are seeing some different geology to the West Branch, and so the encouraging think about that is that's opening up by new targets out for us to exploring the district and it also that gives a potential to improve the great profile in future resources.

I think in terms of the various populations it’s too early for us to tell at this point exactly what the significance of those populations mean. We have a lot of drilling to complete in order to advance that understanding and when we arrive there we will be able to come back with a forward explanation. But needless to say we are excited by those high grades. It can potentially make a difference in the future and we have that new department style that we are exploring.

Glen Masterman

And I would add, I mean we are particularly encouraged that we've had the success so early into our program when we first gotten off of the main structure, the main resource. So we are quite encouraged.

John Bridges - JPMorgan

And as a follow-up I'm intrigued by you keeping the gold price same and the reserve and resource calculation but what happens to Brant when he’s picking up a shovel of all of which is going to generate $5 and is he going to throw that away or is he going to wait until it gets to the reserve material that's going to give him $20.

Brant Hinze

That's a good question and recognizing that I'm a miner we typically don't throw anything away. The reality of it is that material that was marginal typically would end up with rather large stockpiles, and I think there's a lot of really good examples of where that has really paid off and one of the primary examples that we can point to right now and I would say a very, very successful example of that is what we are going through at Fort Knox today. We had a 130 million to 140 million ton stockpile there of low grade material and that we are now putting on a leach pad and making good money off of that. So the reality of it is marginal material we always end up putting in stockpile for future opportunities.

John Bridges - JPMorgan

And you got stockpile space for this material under the new policy.

Brant Hinze

Oh yeah are you talking Tasiast specifically?

John Bridges - JPMorgan

Across the company?

Brant Hinze

Oh yeah, we are fine.

Operator

Next question is from Tony [Lasik] of Macquarie.

Unidentified Analyst

I'll start with a question for Glen. Glen can you provide the CIL versus dump leach split for the most current reserve resource for Tasiast.

Glen Masterman

It might be a better question for Brant here, sorry Tony why don't we get that for you.

Tony Giardini

On the reserve and resource for Tasiast?

Unidentified Analyst

Yeah the global reserve plus reserve measure and indicated, similar to how you broke it out a year ago.

Tony Giardini

Yeah, I apologize we are probably going to take that one offline because I don't have that number in front of me right now.

Glen Masterman

We will get that break down and get back to you Tony.

Unidentified Analyst

Quickly on La Coipa based on what you are seeing at Phase 7 and Pompeya what do you see is the potential mine life extension if this zone or a series of zones actually works out.

Tony Giardini

Well, that's hard to say at this point right now. We are going through the work. We are putting the studies together on what we do know for the Phase 7/Pompeya resource. And we don't have that work complete yet, but as we get information and as we progress through the studies pre-feasibility and feasibility studies on it, we will certainly provide that information. One thing that I would say though and Glen can elaborate on this as well too that we were pretty excited when we had the initial discoveries of the phase seven Pompeya, and for purposes of moving forward, we stopped or cut off the drilling program and came back and did an [intel] drilling program. We’ve since stepped out and did additional drilling there and we like what we see and Glen can maybe highlight a little bit on that as well.

Glen Masterman

Yeah, sure, Brant. I will start by recapping what we did for the year at phase seven and that was the completion of either 70,000 meters of drilling, mainly focused on delineating the oxide mineralization at that discovery and completion of infield and geo-technical drilling. So all of that information now has been transferred to a projects team undertaking a scoping study. Looking forward, we're committing another $14 million of exploration in the La Coipa district because we still after all of this time, feel that we're only just scratching the surface of the potential further discoveries in that district. So we feel very good about what we are continuing to see at La Coipa.

Unidentified Analyst

And maybe just a quick follow up to Greg’s question Paracatu, where do you think you can get to on the cost is $800 an ounce, say, a good long-term estimate?

Paul Rollinson

Well, again, we're going to finish in the PFS by the end of the quarter and we will be able with all of that information later in April, Tony.

Unidentified Analyst

Actually, sorry, I was referring to Paracatu.

Tony Giardini

Alright, Paracatu. And are you speaking for 2013 or beyond.

Unidentified Analyst

Well just long-term the tech report is from 2006, so I am just trying to get a sense of where you are in unit costs and recoveries and how that all shakes to cash cost long-term.

Tony Giardini

We will certainly be updating the technical report coming up I believe we are updating that technical report this year. But one of the things that I will mention here is that we are on the way forward we said that we are going to take a good hard look at all of our mine plans in detail and for 2013 Paracatu is on the list to do a detailed review of life of mine plan there as well to see and make sure that it fits our way forward from a standpoint of margin, free cash flow and improving overall efficiency of that operation.

Having said that, we still recognize that industry costs are still on a rise. We have seen some improvements in Brazil and some opportunities potentially for power cost reductions that we hope that will realize going forward in the future. But I still have to reflect back on a previous statement that I made on mill performance and with a full build out of the mill now with ball mill three, ball mill four and a strong team in Paracatu, I continue to expect to see improvements there.

Operator

The next question is from Jorge Beristain of Deutsche Bank. Please go ahead.

Jorge Beristain - Deutsche Bank

Paul my question is if you could just speak in general terms about industry CapEx per ounce inflation given that we haven't had a firm number put out therefore Tasiast in about two years, I just want to get the general ideas to, if you are seeing the kind of 10% unit cost inflation for CapEx out there on the general basis?

Paul Rollinson

Yeah, thanks for the question. I would say, I don't know that I can give a specific sort of quantifiable percentage, I can speak to tone and certainly as we come through in the past couple of years as you may appreciate several companies have had capital expansions and new projects and that competition that created a competition for people, for steel, for grinding media, for tires. There was a huge amount of pressure as really globally the industry was trying to build out, and of course that resulted in a number of disappointments related to delays and cost over runs and what have you.

As we come through that and the number of the projects have been put on hold, we are seeing the tone the pressure has come out of the system, more than it would say a year ago. It hasn't yet completely gone to the pricing of capital items. The availability is better, the pressure is lower, but the pricing hasn't completely come down yet.

Our focus as we said on the call is we are very disciplined, we are being very vigorous on this capital focus. We have manage to reduce our capital spend most within the 2012 year end going forward in ’13. So we are highly focused on it, I can't quantify how much we are going to be hoping to say, but I would say the pressure has come down and we remain very vigilant on it.

Jorge Beristain - Deutsche Bank

Okay. And if I could have a follow-up and you made some comments early about the maybe unfairness a little bit of IFRS forcing you guys to take these writedowns. But conceptually given that project is sort of two years delayed it may end up being about half the size of what was originally envisioned and at potentially higher unit costs, do you not recognize that there has been an erosion of value versus what was originally paid for Tasiast, I guess that's my question, I mean there's unfairness of IFRS, but are you guys still standing by that there has not been any erosion of value of that project?

Paul Rollinson

I think its difficult question really because we are very excited about what we see at Tasiast and when I think of Tasiast I think of the fact that we have an existing mine, we have a very large resource in the West Branch and we have very perspective exploration and we’ve just gotten going with that exploration and I have to say again I am quite excited about what we found so quickly up that trend. The accounting exercise, its important, its an annual requirement, its very prescriptive, it relies on a lot of third party, many market related consensus assumptions, we've gone through that calculation, it is what it is, we are looking-forward and we are very excited about the long-term potential of what Tasiast will bring us.

Operator

The next question is from Derek Macpherson of National Bank Financial. Please go ahead.

Derek Macpherson - National Bank Financial

Just wanted to follow up on the CapEx spend at Tasiast, you guys are looking at $625 million or sort of infrastructure spending, is that, obviously that's pulled ahead from the total CapEx, does that mean that we should, I guess the question is when do you guys expect to start moving forward in the construction decision, is it post PFS or are we going to see feasibility study later in the year and then post that?

Paul Rollinson

I'll take the lead Derek and maybe hand off to Brant or Tony, but basically we like what we are seeing in our PFS and we have to be a little bit strategic here in terms of how we think about our capital. A lot of the spend as you've pointed out does relate to infrastructure and that would be required under any scenario, so we are moving forward. As well as you pointed out we will complete the PFS on time. We will report the results in April and following that we will go into final phase to really tighten up the engineering and the numbers. But, Brant you may want to kind of comment add to that?

Brant Hinze

And as far as the money that we are budgeted to spend in 2013, it is to complete some of the ongoing infrastructure components, to advance the permanent sea water pipeline, additional mining equipment and stripping costs, makes up the bulk of it. But its like, Paul said though, if Paul and I were just in West Africa for the quarterly business review and we spent a great amount of time, a full day on the pre-feasibility status and looking at where we are at the pre-feasibility, just about complete with the pre-feasibility again, will be done with the next month and we’ll be coming out with information out of it in April. We feel very confident, very strongly confident that we’ve got ourselves a project here and so we're moving forward in that 30,000 ton a day range project and confident that we will see a build out of this.

Derek Macpherson - National Bank Financial

And I guess, then the follow up will be, sort of subsequent milestone and you guys moving to feasibility study, when would we expect to see results of that and I guess when we start to see sort of the mill construction start and the major equipment start to get over and that kind of thing?

Paul Rollinson

Well, I think that’s a, rather than get into that today, I think that’s a great question, as we come out with the PFS results, that’s an excellent time to kind of give an update on timing and milestones from there. Right now, we are completely focused on getting the PFS across the line; we do that, I recall, we'll walk everyone through with it, at that point, we will give you the look forward again.

Operator

The next question is from David Haughton of BMO Capital Markets. Please go ahead.

David Haughton - BMO Capital Markets

Yes, good morning guys. A busy day, so I will take my question offline. Thank you.

Paul Rollinson

Okay. We will catch up with you later, David.

Operator

Next question is from Steven Butler of Canaccord. Please go ahead.

Steven Butler - Canaccord

Paul, Brant and as it relates to Tasiast, if you could estimate what maybe is the sum capital cost that you already put into the project from a growth point of view or under any expansionary sort of oriented capital in other words, it was rather 60,000 or 30,000 tonnes per day, not talking about sustaining that 7,000 ton per day mill but is it the better part of a $1 billion that you have already spent to the end of December 2012 on growth project at Tasiast or just some, just to sunk capital if you will?

Paul Rollinson

It is around a $1 billion Steve and again a lot of it is infrastructure related spend.

Steven Butler - Canaccord

Okay and Glen may be at Moroshka if I am pronouncing correctly, Kupol, I mean is this the, this obviously sounds because in 2009 original discovery or indications of some trend there, are there any other picture clear trends on the greater Kupol west or east licenses that deserve follow-up that we haven’t heard about?

Glen Masterman

Steve, yeah, I’ll just drive on initial part of the question, the initial work was done back in 2009 at Moroshka by the B2Gold and Kinross joint venture which was subsequently taken on a 100% or so, that where a case obviously led to the Moroshka discovery and the delineation if you like of a new trend parallel to the Kupol vein and we know that that trend continues for about at least five kilometers based on stone surface to the chemistry that was developed over the last several years. In terms of other trends at Kupol and we continue to explore north and south of the mine given that that is where the best endowment is and so that work is ongoing, and given the limited, I guess the seasonal variation in Russia, we have limited opportunity to get on the ground for at Kupol east which is a little further from the mine, and so we've only really spent collectively about 12 to 15 months exploring on the ground of Kupol east and so its still very early days. We have a number of targets there that we will continue to follow-up in the future.

Operator

The next question is from Anita Soni of Credit Suisse. Please go ahead.

Anita Soni - Credit Suisse

And so first question is the Kupol reduction in reserve, is that just completely related to depletion year-over-year?

Brant Hinze

Yeah, the primary contributor that is depletion year-over-year.

Anita Soni - Credit Suisse

Okay, and then the second question, Tasiast capital spend for 2013, is any part of that within sort of enhancements sort of category that's not sustaining but included in the non-growth project capital, is that any of that sort of related to expansion or is it all bucketed into the expansion capital?

Paul Rollinson

Yes, so just to be clear Anita so, on the budget and capital how much is when the expansion versus the existing mine is that…

Anita Soni - Credit Suisse

Yeah, I am just trying to see, if anything that's in the sustaining and sort of enhancements bucket could be related to, so you got the opportunity right, in West Africa, any of that $75 million related to the Tasiast expansion or is that, what is that $75 million related to in West Africa?

Brant Hinze

In West Africa, you are primarily talking about the opportunity capital?

Anita Soni - Credit Suisse

Yeah.

Paul Rollinson

Yeah.

Brant Hinze

Yeah. Well, the opportunity capital in West Africa, there is the number of things that are opportunity capital items, for example, we talked about on our way forward we are focusing on margin. One of the things that we are doing, we mentioned it earlier is that we are taking over the surface mining operations at Chirano. So we've got a big portion of that is equipment purchase, another big piece of that is Paboase development underground at Chirano and then there's some additional drips and drabs for Tasiast.

Anita Soni - Credit Suisse

Okay, and so then my question would be at Paboase would that actually incrementally increase the growth at the asset or would that just sort of be replacing depletion when that comes on stream?

Brant Hinze

Yeah, well the Paboase has been in the plan and as we move forward through Paboase, one of the things that we will see is that we will continue to decline down to a steady level of surface production and Paboase would display some surface production. So one could anticipate that mill throughout you would see slightly higher grade as a result of that.

Anita Soni - Credit Suisse

And then the last question, I think someone might have asked but the timeline at Tasiast, is it fair to say that you are going with the sort of 30K ton per day scenario which when you guided for the timeline at this time last year you were looking at the 60K to 80K scenario. So would the timeline for start up be impacted or is the smaller scale and the availability of some of the long lead time items and all that kind of laboring and obviously you need to build the project is that offsetting your timeline per share?

Paul Rollinson

Yeah, Anita, it's Paul here again. I would just, there was a similar question, focus right now job one, complete this PFS report, the results of that PFS in April. At that point in time, you will get a better picture, more clarity on what we are thinking as well we will, I think it’s a more appropriate time to get into sort of the next timeline events as we will likely move from the PFS into the feasibility study.

Operator

The next question is from Alec Kodatsky of CIBC. Please go ahead.

Alec Kodatsky - CIBC

Just a quick question, with respect to Tasiast, I guess a question you are still committed to going ahead with the feasibility study from the pre-feas what elements of the project given the year that you've put into it already, are you looking to tighten up through an actual feasibility study process.

Paul Rollinson

Sure and again that’s a great question Alec. I mean as you know, we are just completing the initiative we launched in August which was going back and studying something in the midsize range and as we have indicated on this call, there's a number of benefits to that midsize range and it does align very well with our way forward initiative in terms of the pursuit of margin and free cash flow but not only that, we believe its lower capital, lower execution risk and still preserves optionality, but maybe Brant, I'll let you kind of elaborate as to where to from here post PFS.

Brant Hinze

Yeah. Well, one of the things I mean you know, its pretty obvious by our comments and our press release that we are focused on that 30,000 ton a day range. And moving forward with a feasibility study, we would expect to move forward with that 30,000 ton a day range. Looking at the pre-feas of course we had to book end this thing, book ending from the do nothing scenario all the way up to the 60,000 ton a day and many variations in between. And as we indicated, we are settling on that 30,000 ton a day range.

But given that going from pre-feasibility to feasibility is the opportunity to take the cost, whether it be capital cost, operating cost, continuing to refine and improve on those cost, continue to refine and improve on your mind plan. But as well too, it’s kind of interesting because if you look at it, the difference between a 36 foot SAG mill and 38 foot SAG mill is about roughly 5,000 to 8,000 tons per day throughput difference. So those are the kind of things that we’ll be focusing in on feasibility study exactly, what size the equipment will be, which will drive, at the end of day, a number of other decisions?

Alec Kodatsky - CIBC

Okay, I was just rather curious. So the pre-feasibility is basically your option analysis and feasibility is an optimization basically?

Tony Giardini

Correct. Yes.

Alec Kodatsky - CIBC

And just, maybe quickly, with respect to the exploration results that you have had, is that starting to shift potentially how you can view the deposit longer-term or is it still too early for that to factor in to how you are looking at Tasiast?

Glen Masterman

I will take that question, it's Glen here. It's still early days in terms of what we might expect longer-term to, in terms of new discovery along the trend. I will draw your attention to other similar Greenstone camps around the world and there are opportunities for multiple styles of mineralization and we're starting to see that that’s happening at Tasiast with the discovery of high grade [veins] in either mine. We have work continuing north and South and we're seeing some different things along the trends. So still really early days and as Paul highlighted earlier, we're really pleased with the outcomes at such an early stage in the evolution of this belt.

Operator

The next question is from Stephen Walker of RBC Capital Market. Please go ahead.

Stephen Walker - RBC Capital Markets

Question for Tony on taxes; we have seen cash or effective tax has increased here year-over-year and guidance is higher by a couple of percent to 33% and 39% percent range. Two things first of all, is there one jurisdiction in particular that’s impacting the taxes inordinately and then secondly what would be a longer term guidance for effective tax rate over the next couple of years?

Tony Giardini

May be I will answer second part of that question first. Typically we really just provide the one year guidance and we have provided a 33% to 39% range for 2013. So all I can suggest for longer term basis is that you use that as the basis for you longer term guidance until we update it. Regarding the statutory rates we have provided guidance on the cumulative rate, but we haven’t broken it down and it really does not depend on each specific jurisdiction. So as a reference point for example Brazil 34%, Canada’s 26.5, Chile has different levels and we are certainly happy go through those with you and give you some color on what the country rates are and how they are impacted specifically on a country by country basis, so you can consider it for your model.

Stephen Walker - RBC Capital Markets

Okay but there is no one escalation or country that’s dictating higher tax rates in that jurisdiction is across board?

Tony Giardini

Well there is, there is nuances, we obviously saw some rate increases in Ghana that came into effect and that had an impact terms of our 2012 numbers and there are other jurisdictions they are proposing tax changes. So it is a bit of a mix but we are certainly happy to go through the affective tax rate from each of the jurisdictions with you, so you got a clear picture on it.

Stephen Walker - RBC Capital Markets

Paul just one last question here. The number of companies are talking about sales of non-core assets can I get your thoughts and comments on what your view is on sale of non-core assets and that given the focus on quality versus growth what we could expect going forward?

Paul Rollinson

I would say my focus is internal. I think we have all the pieces in place, we have astrictive operating mines where we are going to be pursuing a way forward initiative to keep better margin and free cash flow. We have an excellent balance sheet, we have an investment grade rating, and we do own the growth projects and so holistically we don't mean to sell anything to support the balance sheet, nor do we need to buy anything to help with our growth profile. Our focus is really internal and getting more from what we currently own. So M&A is not at the top of list of our thinking. If there was a situation where we didn't feel we had an acceptable sort of risk return proposition, then there might be a conversation, but the M&A is not driving our thinking.

Operator

(Operator Instructions) Next question is from Sean Heberling of Marion Street Capital. Please go ahead.

Sean Heberling - Marion Street Capital

My questions have been answered.

Operator

Next question is from [Daniel Sarauan], a shareholder. Please go ahead.

Unidentified Analyst

I would like to ask does Kinross plan to expose themselves to futures market in terms of selling gold.

Paul Rollinson

No I think the question was really about our policy as it relates to hedging and our policy is that we do not hedge gold. We do remain as a policy totally exposed to the gold price.

Unidentified Analyst

And why is that?

Paul Rollinson

Well, we believe that's what our investors want. We don't want to in anyway potentially cap upside. We are a pure play gold company. We want to give maximum exposure to the commodity and we perceive that hedging would limit that exposure.

Well operator if there are no more questions, I would like to thank everyone for coming out and listening to our call today, and we’ll certainly be available should there be any questions offline we will be happy to take them. So thank you everyone and we look forward to speaking in the next quarter. Thank you.

Operator

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

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