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Executives

Tye Burt - President & Chief Executive Officer

Tom Boehlert - Chief Financial Officer

Tim Baker - Chief Operating Officer

Ken Thomas - Senior Vice President of Projects

Erwyn Naidoo - Vice President of Investor Relations

Analysts

John Bridges - JP Morgan

David Houghton - BMO

Anita Soni - Credit Suisse

Barry Cooper - CIBC

David Christie - Scotia Capital

Jorge Beristain - Deutsche Bank

Steven Butler - Canaccord Adams

Mark Liinamaa - Morgan Stanley

Kinross Gold Corp. (KGC) Q1 2010 Earnings Call May 5, 2010 7:45 AM ET

Operator

Welcome to Kinross Gold Corporations first quarter 2010 results conference call and webcast. As a reminder all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. (Operator Instructions)

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

Erwyn Naidoo

Thank you and good morning ladies and gentlemen. I’d like to welcome you to Kinross Gold’s conference call to discuss our first quarter 2010 financial results. With us this morning we have Tye Burt, President and Chief Executive Officer; Tom Boehlert, our Chief Financial Officer; Tim Baker, our Chief Operating Officer; and Ken Thomas, our Senior Vice President of Projects.

Please note that certain statements may contain forward-looking information and our actual results may differ materially from the conclusions and projections in that forward-looking information. In addition, we caution you that certain factors or assumptions maybe implied in our conclusions or projections. Additional information about risk factors and assumptions are contained in our news release dated on May 4, and management discussion and analysis for the same period, as well as our recently filed AIS and other regulatory filings in Canada and the United States.

Now, I’ll turn the call over to Tye Burt, our CEO.

Tye Burt

Thanks and good morning. I’ll make some first quarter comments and give and an overview of our next series of growth projects, while Tom and Tim will give financial results and operational reviews, while Ken provides an update on our projects.

Overall Kinross had an excellent first quarter. We delivered strong financial results, better operational targets, continue to make progress on our suite of development assets, and continue to optimize and have aligned our asset portfolio with a number of transactions, even while strengthening our balance sheet.

Company wide attributable production was 544,134 gold equivalent ounces, up 3% over Q1 ’09, at a cost of sales of $461 per ounce. On a by-product basis, our cost of sales was $417 per ounce, and gold only sales of 526,815 ounces.

Revenue in Q1 2010 was $657.6 million, representing a 23% increase from Q1 ’09. We delivered strong cost of sales margins, and those margins increased some 26% year-over-year, to $604 per ounce. We had adjusted operating cash flow of $226.3 million or $0.32 a share, an increase of 5% from Q1 ’09. Adjusted net earnings were $97.4 million or $0.14 a share, which increased 38% from Q1 2009.

Speaking briefly to some operational highlights, we are particularly pleased with Paracatu which showed continued strong progress in Q1, producing 117,472 ounces, which is a 37% increase from Q3 ’09 and 8% higher than Q4, so a steady rate of climb there, and a cost of sales which decreased to $556 per ounce, with 27% improvement from Q3 and a 14% improvement from Q4.

We are continuing to make progress optimizing the Paracatu expansion plant and the construction of the third ball mill is continuing on plan. Ken will give some further comments there. At Fort Knox, the EPS performed well again, and ahead of plan with 660,000 of ore stacked in the quarter. At Kupol in Russia, ore extraction in the underground and the open pit was consistent with our expectations for the quarter, and mine developments proceeding on plan.

In the first quarter we continue to refine and optimize our asset portfolio, starting with the announcement of an agreement to acquire the high-grade Dvoinoye deposit in Vodo property, which are both located at some 100 kms north of the Kupol mine in Russia.

We’ve submitted our application to the Russian government authorities to approve foreign ownership of Dvoinoye as required by Russian law regarding strategic deposits. A number of conditions related to the transaction have already been satisfied, and we remain on-track to close the transaction by Q3 this year. Upon closing, we exepct to being work immediately on a 43-101 compliant resource estimate, as well as to commence permitting and feasibility work, including engineering and baseline studies.

On March 31 we closed the sale of half of our 50% interest in the Casale project in Chile. Total transaction value in the sale of Barrick was approximately $474 million and Kinross now owns 25% of the Casale project. We feel this transaction right sizes our participation in Casale relative to our portfolio mix, and strengthens our balance sheet. At the end of the quarter our cash, cash equivalents and short term investments total approximately $1.1 billion.

On April 26, we announced that we had acquired 87% of underworld resources and that we’ll acquire the balance of those shares over the coming weeks. With this transaction comes the White Gold exploration property located in the Yukon Territory of Canada, along with the Tintina gold belt.

It adds high potential property in a prospective jurisdiction, where we have both experience and expertise, and we currently plan to spend about $15 million on drilling programs at White Gold in 2010, aimed at expanding that resource.

I’d say this acquisition is a great example of our strategy for investment in junior exploration companies that have excellent management teams, attractive projects and a compelling valuation and the purpose of that strategy is of course to maximize our exposure to new prospects and growth opportunities.

Yesterday, we announced that we are making a $600 million investment to get a 9.4% strategic equity stake in Red Back Mining. The investment redeploys cash on our balance sheet, especially strong after the proceeds from the Casale sale at the end of March, into a key stake, in a high-growth well managed West African Gold mining company. Kinross will receive the right to nominate our member to the board of directors of Red Back, as well as any dilution rates.

The rational for this investment is simple. West Africa has been a region of tremendous growth in our sector, showing substantial increases in gold reserves compared to traditional Gold Producing countries. In fact in that region, proven improbably reserves have almost doubled to over 85 million ounces for the region in recent years.

We consistently said we like the gold mining potential there and would invest in the region when we say right assets, along with an exceptional management team. The structure we have here this morning lets us continue to focus on our core operations and projects, even as we have a strategic front row seat for West Africa.

The transaction gives our investors enhanced leverage to the gold price through advantaged investment in a high quality gold producing company, with excellent growth potential. It’s consistent with our discipline and measured approach to expanding our business in growth regions.

Finally on Monday, May 3, we announced that our Chief Operating Officer, Tim Baker retires in effect of December 31 of this year. Tim has had a key role in transforming Kinross into one of the world’s top gold producers, and brought four major growth projects into productions during his tenure here.

One of Tim’s great legacy is the strength of the team that he has assembled to manage our regions and operations, and we are pleased that Tim has agreed to remain with Kinross until the end of the year to carry on his current responsibilities, and to ensure a smooth transition following the selection of his replacement. Thanks Tim for your commitment and your leadership.

To sum up Q1, overall Kinross had a very strong first quarter with significant year-over-year increases in revenue, in margins and adjusted net earnings. Looking forward, we are making progress in many fronts. Paracatu is showing significant improvements in operational performance and the third drilling is progressing on target.

We continue to advance our organic growth projects at existing sites along with our major development projects. We also approved that the quarters significant enhancements of Paracatu and Maricunga which Ken will describe, the increased ability study to expand Maricunga is on track for completion in Q2, and drilling at FDN just surpassed the 18,000 meter mark this past weekend, well ahead of schedule. We continue to advance permitting and engage with the government in Ecuador.

Finally drilling continues at Lobo-Marte. We are seeing some very encouraging results there, with some excellent intercepts in the last few weeks, and more intense step-out drilling to follow. We also continue to optimism the asset portfolio as I mentioned, with the accusation of Dvoinoye announced and the White Gold exploration project with Underworld.

I’d like to turn the call over now to our CFO, Tom Boehlert, who will review our financial results. Tom.

Tom Boehlert

Thanks very much Tye. Gross sales for the first quarter were approximately 619,000 gold equivalent ounces at an average price of $1065 per ounce. This generated revenue of $657.6 million, a 23% increase over the same period in 2009.

First quarter attributable cost of sales per ounce were $461. On a by-product basis cost to sales were $417 per ounce. Compared to the same quarter last year, our cost of sales margin in Q1 grew to $604 per ounce, a 26% increase, while the average realized gold price increased by 19%.

Depreciation, depletion and amortization for the quarter totaled $128.9 million or approximately $208 per gold equivalent ounce sold, and we would expect DD&A to continue at approximately that rate for the balance of the year.

First quarter adjusted net earnings were $97.4 million or $0.14 a share, compared to $70.7 million or $0.10 a share in the first quarter of 2009, a 38% increase. First quarter adjusted operating cash flow increased quarter-over-quarter by 5%, to $226.3 million or $0.32 a share.

During the first quarter an after tax gain of $16.8 million was record on the disposition of one half of Kinross’s 50% interest in Cerro Casale. During the quarter we reduced our debt by $52.2 million to $640 million. For the full year we expect to make $177 million of scheduled debt repayments.

Our cash, cash equivalents and shot term investment balance stood at approximately $1.1 billion at the end of the first quarter. Capital expenditures for the quarter were $82.2 million, and based on the addition of the SART plant of Maricunga and a desulphurization project at Paracatu, we’ve increased our capital expenditure plans for 2010 by $40 million, up to $590 million for the full year.

Our full year production and cost forecast remain unchanged. We expect to produce 2.2 million gold equivalent ounces, at a cost to sales of $460 to $490 per ounce. Our sensitivity to commodity prices are a $4 per ounce impact for a $100 move in the price of gold, from our base assumption of $1000 per ounce for the year; a $3 per ounce impact for a $10 per barrel change in the oil price from our base assumption of $75 at the beginning of year; and a $8 per ounce impact for a 10% change in foreign exchange rates.

I’ll now turn the call over to our Chief Operating Office, Tim Baker, for a view of the operations.

Tim Baker

Thanks Tom. The final page of our press release has a review of operations and a mine-by-mine summary for key metrics. To give a brief review of the operational highlights for the quarter; at our US operations Round Mountain and Kettle River performed well. The heap leach at Fort Knox is performing as expected, and we stacked 660,000 tones of ore on the heap during the quarter ahead of plan.

La Coipa attributable production was 144,691 gold equivalent ounces in Q1, at a cost of sales of $314. To-date, results show that ground control concerns encounter in Q3 last year have been resolved, and the refinements of mining methodology are having a desired impact with the production in the first quarter right on target.

Ore extraction in the underground mine and the open pit was consistent with expectations during the quarter, and mine devolvement is proceeding according to plan. Paracatu and Brazil operations of the new plant continued to improve through Q1, with productions rising 8% from Q4 of 2009, and the cost of sales improving 14%. Recoveries have also continued to steadily improve from 72% in Q4 to 76% in Q1.

The gold production has been trending up since October. Group performance of the expansion plans is primarily due to improvement in plan availabilities, stability and throughput, which in turn are the result of ongoing [Inaudible] better oil blending, use of new reagents, and the continues improvement initiatives of management and plant control.

In Maricunga and Chile production was 14% lower, with cost of sales higher than Q4 2009. As production was impacted by lower grades and reduced throughputs resulting from lower equipment availability. Construction of a new 600 person employee camp, located at lower altitude than the previous camp is nearly finished, and is expected to be fully occupied during the second quarter.

Increases in proven and probable results have extended to 2015. Q1 production was 16% lower than Q4, primarily due to changes in ore blend. These issues are being addressed through plant refinements and blending of ore to the plant.

We had a busy first quarter in exploration, carrying out almost 43,000 meters of drilling, a strong focus on La Coipa, Kettle River and Kupol throughput. Drilling results from the 2009 metrological drilling program at the Norte deposit in the Maricunga district; the two holes showing 200 meters at an average rate of 3 grams per ton confirm our confidence in the quality of this deposit.

With that, I’d like to turn the call over to Ken Thomas who’ll provide an update on our pipeline of upside growth and Greenfield projects.

Ken Thomas

Thank you, Tim. First I will review our upside growth projects. At Paracatu in Brazil, installation of the third ball mill is proceeding as planned. Procurement commitments are at 40%, and as you can see by the picture on the webcast slide, construction activity has started at site, and concrete is being poured. Fabrication of the mill is well advanced in anticipation of delivery in mid 2010.

The project remains on budget, and is expected to be on schedule and commissioning in the first half of 2011. We are also continuing to explore additional [Technical Difficulty] production at Paracatu. As part of our plan to optimize this operation, the board of directors has approved the installation of a $30 million defilterization circuit at Paracatu.

This new circuit is expected to reduce sulfur content of the tailing, and increase gold recovery in plant two by approximately 4% when fully commissioned. We expect to have the new circuit operational in the third quarter of 2011, and ready for commissioning of the new Eustaquio tailings facility in 2012.

At Maricunga in Chile the feasibility study on the proposed optimization remains on schedule for completion in quarter two. The project contemplates upgrading the mine fleet, installing new primary and secondary crusher, and converting the existing secondary crushers to tertiary duty. Our goal is to increase ore processing and ounce production and to reduce unit costs.

Key water studies are ongoing to support environmental permitting for the project. We’ve also approved a $46 million investment in a SART plant at Maricunga. With soluble copper content in the ore mine the new pit is expected to increase significantly beginning in the second half of 2011.

We expect the SART plant to delivery two major benefits; optimize goal recovery by removing copper from the heap leach solution, which adds approximately 10,000 ounces of gold equivalent production per year in copper. It will also significantly reduce reagent consumption. We expect the plant to be operational by late 2011.

Turning now to our Greenfield development projects. At Lobo-Marte in Chile our drill program continued in the first quarter. The drilling program continued in quarter one was approximately 3,000 meters of hydro geological drilling being completed.

Results from 2009 metallurgical drilling were obtained during the quarter and showed very encouraging intersections. We have received approval to undertake an additional 12,000 meters of infill and geotechnical drilling to support the project feasibility study targeted for completion in the quarter one 2011.

We will be submitting a permit application for an additional 20,000 meters of drilling, including step out drilling this month. Baseline studies support preparation of the environmental impact assessment which are on track for submission to the authorities.

At Furta del Norte in Ecuador, we have made excellent progress, and we have completed our 18,000 meter drill program well ahead of schedule. The results will be used to complete a pre-feasibility study, which we expect to finalize by year end. An optimization study for mining, processing and infrastructure are in progress.

Implementation of the mining regulations continues, and as part of that process Kinross is completing transitional licensing for its concessions. Type two substitution as required by the new mining law has being completed, and our land titles have been approved by government authority. Progress continues towards submitting the permit applications required for geotechnical drilling and construction of an exploration decline.

As Tye mentioned we closed the sale of 25% of the Cerro Casale project in Chile, and Kinross now owns 25% of the project. The feasibility study for the project is expected to be submitted to the CMC joint board for approval this month. The selection process is underway for an EPCM contractor to advanced basic engineering.

With that, I would like to turn the call back over to Tye for his concluding remarks.

Tye Burt

Thanks Ken. A few comments in closing. To summarize, our first quarter was a solid start to the year, Paracatu’s performance is improving steadily, and we look forward to making further progress in our development projects and refinements to our portfolio.

We are making very good progress on our suite of onsite and Greenfield development projects, and we continuing with our exciting investments for the future. Today we have a strong management team and 5,500 hard working employees dedicated to advancing our projects and delivering the next wave of growth for Kinross shareholders.

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

Question-and-Answer Session

Operator

Thank you, Mr. Burt. We will now begin the question-and-answer session. (Operator Instructions) First question is from John Bridges of JP Morgan; please go ahead.

John Bridges - JP Morgan

Good morning Tye, and thanks for the call.

Tye Burt

Good morning.

John Bridges - JP Morgan

Good morning. I was just wondering, could you give us a bit more detail on what you are trying to get out of the Red Back purchase there. The valuation multiple on this is significantly higher than yours; how do you see this going forward?

Tye Burt

Thanks John. I will be very clear on the Red Back investment. First, we won’t speculate on what comes next. That will unfold in due time with the world changing around us. I will explain carefully here again, the rationale for our investment and a couple of key points.

One, focus for Kinross remains only the very best assets, and if you look at the pattern of buying Kupol, buying FDN, buying into Tasiast and Chirano, we think these things continue to attract our buying into the very best deposits. Secondly, West Africa is a region of really high growth. I think I mentioned some stats there.

In the last four to five years the reserves in this region overall have almost doubled to 90 million ounces, and we see lots of growth for the future. So we think the party gets bigger. We don’t think related to the party we want to have a dance partner very early in that progress. You’ll recall, we did exit our African assets in sub-Saharan Africa four or five years ago when we sold in Zimbabwe and the Congo. We think West Africa is a different story and exciting for the future.

Next I would say, we had a lot of cash in our balance sheet especially after the March 31 closing of the sale of our Casale interest. We’ve been working on West Africa and telegraphing this potential for a couple of years, and we have been busy for quite a while looking carefully at a number of opportunities there. Red Back was clearly the best, and we think that compared to holding cash in T-bills, holding a 9.5% stake in exciting growing gold producer is a good use of our cash.

Next I would say, having an excellent management team with the West African experience was critical. So that allows our Kinross management team to continue our focus on our core operations and our core projects, even as we look at long term options in the future in new regions. So I’ll just reiterate, we looked carefully for a great management team. We think Lucas and Rick have put together a tremendous team at Red Back.

I would also say John, we have done our home work here. I mentioned West Africa has been on our radar screen for a couple of years. We got months of technical due diligence and site visits, and the pattern is clear from our past investments and this one. We usually go into our new region up to our ankles are broken, use a binocular, look carefully, assess what the future holds and what our options are, and in the end result here we became an advantaged buyer of a high growth vehicle with board seat and anti-dilution rights, so we are keen on our position.

Then finally just speaking the price, it’s been a bit of moving target at Red Back of course. Our investment is at or about a 10 day average price here, but we obviously believe that there is long term recreation from this potential in the projects and in the equities here.

As I’ve said so often, we are always looking for asymmetric risk when we make investments, that is much more upside and downside when we think about it. Once again it is the case here. So bottom-line, we used some extra cash to get more leverage to the gold price with a high growth vehicle.

John Bridges - JP Morgan

Have your geo’s worked the property in Maratania?

Tye Burt

Yes indeed.

John Bridges - JP Morgan

And you are comfortable with this thermal exploration.

Tye Burt

Yes we are very excited. It stands out as quite a geologic normally when you look at that banded iron formation, and then the new green shift zone, very exciting, and look forward to continued drill success there.

John Bridges - JP Morgan

Many thanks for your thoughts there Tye. I appreciate that. Thanks and good luck.

Tye Burt

Thanks John.

Operator

Next question is from David Houghton of BMO; please go ahead.

David Houghton - BMO

Yes good morning, and thank you for the run through. I got a couple of questions on Paracatu. Quite an improvement this quarter compared to what we have seen in the recent past; a lot of it driven by the grade and of course the recovery staying intact. Do you see that kind of grade going forward through the balance of the year or is it going to come back to a lower level?

Tye Burt

It will drop down a bit for the rest of the year.

David Houghton - BMO

All right, and the recoveries you are comfortable with that throughput matching the recovery for the balance of the year?

Tim Baker

Yes, we continue to do a lot of work on fine tuning the plant and getting good results. The recoveries are inching up as we go forward, and the throughput is inching up. We have seen some improvements in the throughput based on the hardness and so.

Tye Burt

David, just to confirm what Tim said, if we were 0.46 in terms of grade for the quarter, average for the year is probably going to be 0.43 for the remainder too, and not significantly different but lower.

David Houghton - BMO

And when we are looking forward with the desulfurization, adding another 4%, that implies moving up to the 80% or the high 70% recovery.

Ken Thomas

Ken Thomas speaking. Yes, we anticipate with the present recovery, the 4% will take us up to the 81 mark.

David Houghton - BMO

Having a look at the CapEx spend for the quarter at Paracatu, significantly below what we would have expected for an annualized run rate, I presume that there is going to be a huge catch up spend for the balance of the year. Will that be more in the second half fourth quarter or do you see it fairly evenly spread for the balance of the period.

Tom Boehlert

Hi, it’s Tom. It’s really all timing as you alluded to, so I would expect it to ramp up really over the course of the year.

David Houghton – BMO

All right, Tom well I got your depreciation rate seemed to have stepped up in most of the assets. Should we use the per ounce metric that we can back calculate for each of these assets as indicative for the balance of the year and going forward.

Tom Boehlert

Yes, I would say on an overall portfolio basis that would be the right approach. From quarter to quarter we have swings in depreciation rates depending on the cost based built up and inventory and so on, but the $200 to $210 per ounce for the full year I think would be a pretty safe range to use.

David Houghton - BMO

And while we are talking about rates, the income tax rate looked a touch higher than previous expectation. Should we use that kind of run rate going forward in the 36%, 37% for the balance of the year or do you expect it to come back a touch.

Tom Boehlert

As I mentioned at the beginning of the year, we would expect the range to be between 34% and 39% for the full year. It was a little bit high in the quarter as a result of the tax on the sale of the Cerro Casale interest. Our effective tax rate was 36.2%. If you back out the Casale it would have been 34%.

David Houghton – BMO

Now I got you. And final question, I heard as we had the run through that drill hole of -- I think I got it right; at 200 meters 3 grams by Del Norte. How does that fit into the general picture for Lobo multi development? Is it a higher grade portion of the ore body that this is reflective of, or just trying to think about how this might impact the overall grade for the ore body?

Tye Burt

At the moment it doesn’t significantly change the overall grade, but it’s a good confirmatory hold that the grade exists and that we are getting good substantial debts of it, but its not the outside of the ore body that we had defined at the beginning.

David Houghton – BMO

And will these results be included in your next ground of reserving results calculations, presumably released for year end?

Tye Burt

Yes absolutely.

David Houghton – BMO

All right. Thank you very much.

Tye Burt

Thanks David.

Operator

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

Anita Soni – Credit Suisse

Thank you. I just want to confirm, did you say 34% to 39% effective tax rate or 35% of tax rate?

Tom Boehlert

The range is 34% to 39%.

Anita Soni – Credit Suisse

Then just a couple of questions with respect to the grades at Kupol, similar to the question that we had at Paracatu. Does that expect -- that 20 gram per ton range, would that be sustained or would it tend to group down over the course of the year?

Tye Burt

It all creep down a little bit through the course of the year. Looking about 18.5% I think over the course of year.

Anita Soni – Credit Suisse

Yes, and then the recovery rates to remain relatively strong at 95%?

Tye Burt

Yes it’s been good. I mean the grade comes down, obviously we expect our recovery to come down, but the holding, the recovery is pretty well, it’ll keep down a little bit. We are budgeting a lower recovery for the year.

Anita Soni – Credit Suisse

And then kind of an opposite question at Round Mountain. It seems like the grade dropped a little; is that expected to come back up or to remain at the current levels? Went to 0.53 from 0.65 in the previous quarter?

Tye Burt

Yes, it certain won’t increase, it’ll probably decline a little bit for the course of the year. It depends on how much heap leach material we put, and its going to stay around about the same.

Anita Soni – Credit Suisse

And lastly, at Fort Knox, you put 660,000 ounces on the leach pad this quarter. Can you give us an idea of how much for the full year you guys are planning on?

Tye Burt

Yes, that was 660,000 ton. I think we are planning about 14 million tons.

Anita Soni – Credit Suisse

Okay. Thank you very much.

Tye Burt

Thank you.

Operator

Next question comes from Barry Cooper of CIBC; please go ahead.

Barry Cooper – CIBC

Yes, good day everyone. Just wondering what is your understanding of the use of funds going to Red Back. Obviously you’ve got anti-dilution provisions that you’ve talked about. Was there a discussion of what this money is going to be use for, and are they in a position to use it as they wish.

Tye Burt

No strings attached to the funds Barry. They are for general corporate purposes as we understand it, and one could only speculate, so I would leave it up to the Red Bank management, but they obviously have lots of drilling to do and lots of technical work to do on potential expansions. So we presume that’s what it’ll be used for.

Barry Cooper – CIBC

Right okay. So there was no discussion specifically on growth aspects in terms of building a bigger bread box if you want to call it that?

Tye Burt

No, we did not try and tie them up for a specific use, no. They got a good management team. I think they’ve got their eye firmly on the ball, and that’s one of the reasons why we made the investment, because we believe those guys have got a good team doing the right kind of work.

Barry Cooper – CIBC

Right, and then for Tim, the La Coipa mine line expansion, you talked about reserve changes there. Are these new or are these just a formulation of what happened with your year end reserves? I’m trying to sense from the information here if there is a new reserve, what kind of figures are we talking about?

Tim Baker

It’s what we reported at year end.

Barry Cooper – CIBC

Okay. Yes, its nothing really new then, okay. Thanks a lot.

Tim Baker

Thanks Barry.

Operator

Next question is a follow up from John Bridges of JPMorgan; please go ahead.

John Bridges – JPMorgan

Hi, sorry about that. The SART plant, there was suppose to be a SART plant at Marte Lobo and now its at Maricunga is that correct?

Ken Thomas

Ken Thomas speaking. Technically you’re correct. The SART plant will be installed at Lobo Marte when the project goes into implementation, but also we are installing one at Maricunga. Both properties have similar characteristics and in fact that soluble copper increases as we proceed forward for the next couple of years.

John Bridges – JPMorgan

Okay, I was thinking maybe that the one at Maricunga might be a good test as to get experience with it before the Lobo Marte one, but it doesn’t sounds like the time is going to work there either?

Ken Thomas

No. It’ll be an excellent experience this year. In addition these plants are operating successfully at Yanacocha and Telfer in Western Australia. So for Tim, it’ll be a good learning ground to go forward with Lobo-Market.

John Bridges – JPMorgan

Okay. Have you got more information on these things because there doesn’t seem to be a lot of information out there.

Tye Burt

John it’s Tye. Perhaps we could sit down -- we’ll be visiting in the next few days. Maybe we can sit down with some of the technical stuff and hook up Ken on the phone later. Its an interesting technology, and as Ken mentioned, in two or three different ways it helps the economics.

John Bridges – JPMorgan

Then I just wondered, you were very successful with buying into diamonds at the Harry Winston thing. I just wondered what you thought about PGMs as a possible addition to the precious metals portfolio.

Tye Burt

Now let’s be absolutely clear here. Gold is business number one. Precious metals, we do produce a bit of silver, but we are in the gold and silver business. Our investment in Diamonds, thank you, has been quite successful from a financial return point of view, and the diamond prices continues strong, and our investment value there continues strong. We don’t have any current plans to invest heavily in other metals at this time.

John Bridges – JPMorgan

Thanks for the clarification guys. Good luck.

Tye Burt

Thanks John.

Operator

Your next question is from David Christie of Scotia Capital; please go ahead.

David Christie – Scotia Capital

Good morning guys. At Maricunga when’s the expansion feasibility study coming out?

Tye Burt

The completion of the feasibility study will be in the second quarter. I anticipate it to be somewhere a month to six week from now; and its on track for our completion as per the schedule.

David Christie – Scotia Capital

Any idea what the CapEx will be, that you can give us at this point in time?

Tye Burt

No we are still -- that’s one of the reasons it’ll take us a couple of weeks or a few weeks to understand the capital. We are putting those figures together at this point in time.

David Christie – Scotia Capital

At Fort Knox you mentioned how many tons you are going to place there. What’s your sort of goal do you expect to get out of the heap leach this year?

Tye Burt

I think its about 60,000, 70,000 ounces.

David Christie – Scotia Capital

Okay, and just on the follow up to the last question. On the HWD shares there, you’ve made a good sum of money on them, any plans on what your future is for those shares?

Tye Burt

This continues to be an opportunity. We are watching closely. We think that given where prices have gone David, there is more upside there in the stock, but to us we don’t want to close out any options. It could be a source of liquidity and obviously we get investment banker recalls all the time. But at this point, no particular plans other than watch carefully and be opportunistic. That’s our sort of bottom line comment on that investment.

David Christie – Scotia Capital

Yes, well diamond prices are rising, that's great. Thanks guys.

Tye Burt

Thanks.

Operator

Next question is from Jorge Beristain of Deutsche Bank; please go ahead.

Jorge Beristain – Deutsche Bank

Yes, good morning. Jorge Beristain, Deutsche Bank. A question I had I guess for Tye would be, is there any specific lock up period on your end regarding the Red Back investment, or as part of the purchase was there any option to acquire further stake in Red Back. What I’m trying to get at is, are you okay with keeping sort of a passive 9% stake in that company as a long term investment?

Tye Burt

A couple of comments Jorge; one, our stock is subject only to the standard statutory four month whole period in a typical private placement. Point two, we have a 9.44% interest and a buoyancy, so I would call that little bit more than passive. We also have done a lot of homework on the district and the company and the assets. So it’s a front row seat; it’s a careful watch and looks seat, but as to future plans, we wouldn’t want to speculate right now.

Jorge Beristain – Deutsche Bank Securities

Okay, and my other question was, in term of your adding significant African exposure here, is your company I guess okay with the message that you are sending by basically adding another major geography now back to your portfolio mix in terms of the -- I guess you are saying this is a region with high growth, but it does bring a little bit more complexity to your stock?

Tye Burt

Well, I’d say this; one, we distinguish between Sub Sahara in Africa, and West Africa quite carefully. We had assets in Sub-Sahara in Africa which we’ve exited, we note that others are may be doing somewhat similar moves recently, but West Africa is quite different. Obviously we have to go country by country, but we see it has high growth.

One of the important messages in what we said a little earlier was that, we wanted to have and we’ve been polygraphing this for couple of years. We entered West Africa, we wanted our investment to come with an experienced management team there, and we think this is one, and therefore we don’t think from an operating prospective yet. It doesn’t add complexity for us, because we have this team at Red Back that is doing so well. So that’s one of the reasons for the strategic investment structure that was used here.

Jorge Beristain – Deutsche Bank Securities

And lastly, just in terms -- could you may be share your thought process in terms of when you came into this pool of money, was any thought given to perhaps de-hedging the company, buying out the remaining gold hedges, or was the decision as you said versus a parking the money and treasury simply putting it in a higher return asset?

Tye Burt

Yes, Tom you want to speak to the de-hedge.

Tom Boehlert

Yes, the method we’ve use to basically offset those hedges is to enter into offsetting purchases. So we’ve basically closed out the exposure for 2010. Before the beginning of the year we had entered into -- sorry, by the end of this first quarter or by the end of January entered into offsetting purchases for all of the ounces for 2010, and we have also offset about two thirds of the ounces for 2011.

So bottom line is, we only have about 180,000 ounces of uncovered hedges left on the book. So we’re really pretty much around it down, but not by buying them back but by offsetting them with forward purchases.

Tye Burt

And then second point you asked about cash in key bills; look, we closed the Casale sale at the end of March. That gave us some $454 million of cash proceeds, and so we saw some symmetry in that cash availability compared to our long due diligence and work in West Africa. So that brought the whole thing to an interesting opportunity to move investment into the Red Back equities.

Jorge Beristain – Deutsche Bank Securities

Okay, thanks very much.

Tye Burt

Thank you.

Operator

Next question is from Steven Butler of Canaccord Adams; please go ahead.

Steven Butler – Canaccord Adams

Good morning. Guys on the two process enhancement studies, Paracatu desulfurization and Maricunga SART, do you have rates of return on each of these presses enhancements. They look kind of positive, but again we are lacking some data. If you have rates returned at a current or a near gold price it would be great if not fine. Is it more on the Maricunga SART a matter of more stabilizing the gold recovery or when you see optimizing more improving gold recovery and if so by how much, to what level? Thank you.

Tim Baker

On the first question, regarding the IRR, on both projects they are very attractive and they are in the double digits. Even at the $800 gold price, and further up we’ll see the IRR increases dramatically.

On your second question with regard to recovery, on the SART plant, it not only stabilizes recovery, but it enhances it as well. As probably a lot of technically bent people would understand, copper has an adverse impact in the refinery process in the gold plant. So the SART plant will definitely stabilize our process and in fact enhance recovery.

Steven Butler – Canaccord Adams

And Tim your long term recovery assumption for Maricunga would be around what level now?

Tim Baker

At about the same level, yes.

Steven Butler – Canaccord Adams

Okay. Thank you very much again.

Tim Baker

Thank you.

Operator

Next question is from Mark Liinamaa of Morgan Stanley.

Mark Liinamaa – Morgan Stanley

Good morning. I know you have no exposure to the tax discussion, the potential changes in Australia, but can you provide any comments as how you see maybe the world changing as far as how profits are shared between post countries and providers of capital? Thanks.

Tye Burt

Sure. Quite right Mark, we don’t have Australian operations. We sold those some years ago. So my comments a general one; we are I guess disappointed to see another example of possible, not certainly another course, but possible in a resource nationalism which we see regularly. Not the similar from some things that happen in Canada or drop legislation that’s under review in the US. So it’s a bit unfortunate that one of the bright spots in the economic world today has been killed a bit by that initiative.

But I would say that overall, one has to go country by country and when we look at our portfolio we think we have some pretty attractive tax rates in Chile given their reinvestment structure there, in Russia given the low corporate tax rates there, and stable rates at least so far in the United States.

So Australia is not a direct impact. Overall it’s not probably a good thing for the overall mining sector, but any other discussion would have to be country-by-country, and I think it speaks a bit of a trend, but I don’t think its going to light a fire if I could use the vernacular. It’s not going to light a fire under a lot of other nations, and I think it’ll frankly face some opposition from the major companies that are heavily invested in Australia.

Mark Liinamaa – Morgan Stanley

Great. Thanks for the comments Tye.

Tye Burt

Thanks.

Operator

We have a follow up question from David Christie of Scotia Capital.

David Christie – Scotia Capital

Just one quick question guys; on the anti-dilution class in the Red Back shares, how long it that put for?

Tye Burt

Yes, it’s anti-dilution rights for one year David.

David Christie – Scotia Capital

One year. Perfect, thank you.

Operator

Another follow-up question from Anita Soni of Credit Suisse; please go ahead.

Anita Soni – Credit Suisse

I just wanted to get some clarity on some of the, I guess the special levy in Chile. What’s your understanding of that, and do you think it’ll be passed and when do you think that will take place in terms of the earthquake rebuilt?

Tom Boehlert

There are two components to it, and they are both proposals at this stage. One would relate to the income tax, and the proposal is that the tax rate would go up from the current level one rate of 17% to 20% in 2011, and 18.5% 2012, and then back down to 17% and 13%.

Then there is a second proposed tax which is the mining tax, and this is a voluntary tax. Current rate is 5%. The proposal is that it would be increased to 9% for 2010, 2011 and back down to 5% in 2012.

They are proposals, they are subject to debate. We don’t have a view at this stage on if and when the actual legislation would be proposed, but to give you an order of magnitude, if all those taxes were implemented based on our projections over those three years, it would amount to about $8 million of incremental tax for Kinross.

Tye Burt

In aggregate?

Tom Boehlert

Yes.

Anita Soni – Credit Suisse

Okay, thank you very much.

Operator

This concludes the question-and-answer session. I will turn the conference over to Mr. Burt.

Tye Burt

Thanks very much for your questions this morning folks. When we look at the bigger picture over the last few years, we’d say that Kinross have aggressively transformed itself to the 2 million ounce producer we have today.

We’ve build Kupol, Kettle River, Buckhorn, Paracatu, Fort Knox, and are in a much stronger position today from our financial and operating prospective as we launch this next wave of growth. We have a suite of high quality projects, the right teams in place to advance them, and a very substantial investment addition to our balance sheet announced yesterday.

Thank you very much for your questions and patience this morning. Thanks operator.

Operator

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

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Source: Kinross Gold Corporation Q1 2010 Earnings Call Transcript
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