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Executives

Tracey Thom – VP, IR

Scott Caldwell – President and CEO

Hal Kirby – EVP and CFO

Analysts

Sam Crittenden – RBC Capital Markets

Brian Christie – Desjardins Securities

Steven Butler – Canaccord Genuity

John Tumazos – John Tumazos Very Independent Research

Tara Hassan – National Bank Financial

Shawn Campbell – Macquarie

Allied Nevada Gold Corp. (ANV) Q4 2011 Earnings Call February 27, 2012 8:00 AM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Allied Nevada 2011 Year-end Financial Results Conference Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions provided. I would like to remind everyone that this conference call is being recorded today, Monday, February 27, 2012 at 8 A.M. Eastern Time.

And I would now turn the conference over to Tracey Thom, Vice President, Investor Relations. Please go ahead.

Tracey Thom

Thank you very much. Good morning, everyone. Thanks for joining us this morning. We’ve issued two press releases this morning one related to the 2011 year-end financials and the second one related to the results of a preliminary economic assessment for our Hasbrouck project in Nevada.

On the call, Scott Caldwell, President and CEO; and Hal Kirby, Vice President and CFO, will discuss the results of both the PEA and the year-end financials.

Before we begin, I’d like to remind everybody that certain statements we’ll make during this call may contain forward-looking information. For additional information, I refer listeners to the cautionary statements regarding forward-looking information contained in our press releases and on our website.

I’d now like to turn the call over to Scott Caldwell.

Scott Caldwell

Thank you, Tracey, and good morning to everybody on the line. And I’d like to thank you for spending some time with us first thing this morning.

So, 2011 was another exciting year for Allied. The entire company continues to have excellent performance in the health, safety and environmental area. The performance really is a credit to the men and women that are working out of Hycroft and our other projects, including Hasbrouck.

The Hycroft line produced over 100,000 ounces of gold and 470,000 ounces of silver over the course of the year. Our gold sales lagged production really due to a growth in inventory ounces. This month, so, through the year-end, the end of this month, so through February, we’re informed by an official processing our offsite processing facility that they no longer accept our carbon and, therefore, liberate our gold offsite. And as of today, we have approximately 13,000 ounces of gold on carbon.

We’re working on ways to remedy that it’s up to an including building our own and carbon strip facility. We’re going to look through that and also talking to other outside people that my indeed process our carbon. Gold’s not going anywhere. It’s just locked up in carbon for now.

Our adjusted cash cost for the year was still looking very nice at $488 an ounce. The silver-to-gold ratio continues to increase. And the increase in silver production as a by-product credit, of course, it’s a real help to our operating costs.

Costs were at the high end of our guidance, again, due to a couple of things. Primarily, the mining equipment delays that we’ve been suffering through all-year long, again, the tragic events in Japan delayed some shovels and we’re forced to run smaller, less efficient loading units and trucks to keep more ore flow moving but we weren’t able to nearly mine what we wanted to.

So, anyway, fewer tons at higher costs, so that’s kind of impacting our cost profile, otherwise, it wouldn’t even look better than the $488. Just talk about the arrival of the first large shovel to get a complete month, we actually have two running now, but the first complete month with one of the big shovels running, our mining cost on a unit basis has basically declined 30%. It was a combination of lower operating costs because of the new piece of equipment and not running the smaller stuffs but just as importantly mining more tons.

Moving on to the gross side of our story and Tracey’s talked a little bit about one of the things I’m going to speak to, but the heap leach expansion at Hycroft is growing well, going very well; the Lewis pad which is about 3 million square feet in the first Merrill Crow plant expansion which takes us from 5,000 gpm to about 8,000 gallons per minute. We’re completing over the course of the year two, as I mentioned, two large hydraulic shovels that are operational now. The first is operational at the end of the year, the second shortly thereafter. And the third shovel is due to arrive at site in the second quarter of 2012. Now, we’ll see what happens there. And we believe it will show up. But we really don’t know until we get a shipping date. So, we’ll see what happens there.

Anyway, through arrival of this equipment, the plant mining rate will increase to about 80 million tons per annum once that third shovel is there. The drills are in place, the trucks are there, so we’re really just kind of waiting on that shovel.

Moving further down the growth story, we completed a feasibility study demonstrating the viability of the Hycroft mill expansion in October of the year. Our Board of Directors approved funding to advance the project. And to date, and this is a press release we had, a few ago weeks ago, we’ve purchased large equipment long lead items totaling about $350 million. And if you looked at the feasibility study for the same items, this $350 million was about 2% under the feasibility estimate. The equipment purchases, again, we’ve mentioned this previously, we have an equipment lease arrangement with Caterpillar and Komatsu and Bank of America totaling about $300 million.

So, between this and cash on hand, we’re in great shape to honor the $350 million commitment. We recently announced a new oil reserve at Hycroft. The reserve now stands at 12.7 million ounces of gold and 480 million ounces of silver. We continue to evaluate our reserves using a $800 gold price, the $14 silver price; pretty conservative metal price assumptions there. The revised 43-101 or updated feasibility study with the new mine plan will be out sometime in early March.

Another development role that just happened a couple of days ago. We received regulatory approval to begin construction on the gyratory crusher and that’s the first element of the mill expansion. Also, part of our strategy is to run that crusher sooner, crush 100% of our oxide ore and improve recoveries by several percentage points.

Tracey mentioned we completed a preliminary economic assessment or a scoping study for the Hasbrouck Mine. The study envisions constructing a heap leach mine very similar to the original Hycroft Mine that we restarted to a Merrill Crowe plant, about 5,000 gpm. And it indicates that we can produce about 135,000 ounces of gold and 540,000 ounces of silver per annum and an average cash cost of about $550 per ounce. That includes taxes and royalties.

The initial capital cost is around $78 million, and that would be for the Merrill Crowe plant, truck shafts, infrastructure, well fields, that kind of stuff. We actually envision moving the lower or the smaller mining equipment, the stuff that’s going to be stood down at Hycroft at 3,500 shovels and the 200-ton trucks, et cetera, moving that to Tonopah where this place is located, where Hasbrouck is. And so, the capital cost, we’re trying to manage it and keeping it low.

The study shows that it has a very strong internal rate of return and other financial metrics. And the financial metrics for this study were done at a $1,000 gold price. We’ve already begun work on the baseline, environmental baseline studies, and we really think that we can have permits to begin construction on this project in the second half of 2014.

We believe that with additional drilling planned for the second half of this year, the resource will expand. And if the resource in the district gets large enough, we may construct a small mill. When I say small, we’re talking about 6,000 tons a day. So, right now, I’m pretty short mine life, only about five years forecast in the study, but still for Allied, a nice production growth of 135,000 ounces. And if we could find a little more ore, we’ll go ahead and drill the mill, and the production gets up under the 175,000 to 200,000 ounce range.

Looking forward at Hycroft, gold and silver production is expected to significantly increase in 2012 180,000 to 220,000 ounces of gold and about 750,000 to 850,000 ounces of silver.

Cash costs in the similar sort of range that we’re in right now. For the low end of the guidance, we have about $495 an ounce. For the high end of the guidance, we have $475. That broad range is just trying to estimate what could happen if equipment deliveries slipped. In other words, if that shovel does not show up middle of the year, we can’t mine the tons, we won’t make the ounces. But, again, everything looks like it will be on time, and we’ll just see it when it arrives in Long Beach.

And with the receipt of the regulatory approval on the gyratory crusher, we intend to begin construction on that gyratory crusher in March, and that’s several months ahead of our plan or schedule. So, that’s great news, and that’s really the first part of the mill.

We’ll continue to advance Hasbrouck over the course of the year, and the goal is to begin construction in the second half of 2014. And we intend to drill a number of exciting exploration projects in the second half of 2012, one in Cortez, perhaps Illipah, obviously Hasbrouck and weather and permits allowing, we’d like to do some drilling up on Wildcat, which is about 40 kilometers away from Hycroft.

With that, I’ll turn it over to Hal and Hal will go over our detailed financials. Hello?

Hal Kirby

Thanks, Scott. For the full year, we reported net income about $36.7 million compared to $34.1 million for 2010. For both years, this equates to $0.41 per share basic earnings. Total revenues were $152 million, up from $130.9 million in 2010. Gold sales in 2011 consists of 88, 191 ounce of gold at an average price of $1,577 per ounce. 2010, we sold 102,483 ounces at $1,230 per ounce.

Silver sales were 372,000 ounces of silver at a price of $35 per ounce while in 2010, we sold 238,242 ounces at a price of $20 per ounce. Total cost of sales was $63 million compared to $64.7 million last year. On an adjusted cash cost basis, this equates to the cost per ounce of $488 which was in line with our guidance for the year.

Appreciation expense diverse of the same between years at $7 million. Total exploration development in landholder cost was $28.2 million compared to 2010, expenditures of $25 million. 2011 expenditures, there’s $9.7 million of exploration expenses at Hycroft compared to $17.3 million last year. Most of the current-year expenses were acquired to complete in-fill drilling for the feasibility study that we released later in the year. At Hasbrouck, we expensed $12.2 million, a follow-up on our 2010 exploration success at that project.

Total corporate general and admin expenses were up slightly to $18.6 million from $17.3 million with the increase being related to the increased staffing to advanced projects at both Hycroft and Hasbrouck. Interest expense was $0.7 million with the remainder of the interest paid being capitalized in accordance with accounting rules.

In 2011, we recognized a gain of $1.1 million on the disposal of the Contact property. Our net income before taxes was $43.1 million, up from $27 million in 2010. Our income tax expense for the year was $6.3 million compared to income tax benefit of $7.1 million in 2010. In 2010, income tax benefit was the result of the removal of a valuation allowance on our deferred tax assets. There was no such entry in 2011.

Our effective income tax rate was approximately 15% for the year. In 2011, we continued to consume our net operating losses and other tax preferences. At the end of the year, we still had $42.4 million of net operating loss carry forwards to protect future income.

Once the project gets to a steady state, we will expect our effective tax rate to be in the 25% to 30% range. The effective rate is lower than the 35% statutory rate due to the positive effects of the percentage depletion adjustments that mining and resource companies currently benefit from. For the full year, we reported net income up to $36.7 million, up from the $34.1 million last year. And in both years, this resulted in basic earnings per share of $0.41 per share.

Statement of cash flow. I’d like to highlight a number of items that warrant further discussion. In 2011, our net cash provided by operating activities was $17.4 million compared to $24.3 million last year. 2011, our metal and heap leach inventories increased by 38.9 million which represents a $5.6 million in supply of inventory balances and $33.3 million increase associated with the increased work in-process at Hycroft as we expand our mining heap leach in-processing operations.

During 2011, net cash used investing activities was $85.3 million compared to $37.9 million in 2010. 2011, we spent a total of approximately $90 million on plant and equipment expansions at Hycroft. Off this total, roughly $46 million represents mobile equipment that was acquired under capital leases and as such are reported as a non-cash transaction below the statement of cash flows. This equipment included an EX5500 shovel, seven massive haul trucks and some ancillary support equipment. The remaining $44.2 million related to $16.2 million of mobile equipment purchases, $11.6 million for leach pad expansions, $7.9 million for a new truck shop, and the remainder was for expansions of the Merrill Crowe processing plant and some other minor cap provisions at the mine.

2011, additions to the mine development expenses were $37.3 million compared to $9.8 million in 2010. 2011, $15.5 million of the mine development expenses related to the pre-production stripping of the Cut-5 pit, $17.2 million was related to ore reserve definition drilling and technical engineering drilling for the oxide and milling expansions, the remaining percentage of the capitalized engineering cost associated with the Hycroft expansions. 2011, we also increased our restricted cash by $3.8 million to support the reclamation bonding for Hycroft.

During 2011, our net cash provided by financing activities was 5 million compared to 259.8 million in 2010. 2011, most of the cash provided by financing activities resulted from a sales leaseback transaction of $9.5 million for the EX5500 shovel, plus 5.6 million of repayments of our existing capital leases. In 2011, our cash and cash equivalents decreased by 62.8 million ended the year with $275 million of cash and cash equivalents.

With that, I’d like to hand the call back to Scott. Thanks.

Scott Caldwell

Thank you, Hal. And on that note, we’ll try to answer any questions that you might have.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question today comes from the line of Sam Crittenden of RBC Capital Markets. Please go ahead.

Sam Crittenden – RBC Capital Markets

So, question on Hasbrouck. Just wondering if you could provide a few more details on the PEA. What sort of mining rate are you talking about there?

Scott Caldwell

It’s a very low mining rate. Tracey, maybe you have the number in front of you, but it’s a low strip ratio. Strip ratio is about 0.3 to 1. So, year one is a bit of a pre-strip, the maximum is about 20 million tons per annum. The rest of the time, it’s about half of that. So, less than Hycroft mine that was mining with its fleet when we reopened.

Sam Crittenden – RBC Capital Markets

And then what about the high-grade zones? How do those factor in? Are you able to mine those in earlier years?

Scott Caldwell

Yeah, we are able to mine them in the earlier years, and we just don’t have enough high-grade. We looked at plans of stockpiling that high-grade and then building a mill. Well, we just right now, the resources sitting at only at 1.2 million contained ounces, just don’t have enough of the high-grade, but we’ve got it identified. We’re going to be drilling on it. And if we get enough high-grade with the drill program this year, we’ll go ahead and build the mill.

Sam Crittenden – RBC Capital Markets

Okay, so the mill is an option upon the table.

Scott Caldwell

Yeah, absolutely. And we’re talking of small mill. We’re talking 6,000-tons-a-day mill here, so it’s not the same league as the mill we’re contemplating out of Hycroft.

Sam Crittenden – RBC Capital Markets

Sure. And then what sort of cut-off grade did you use for the resource, and is there any leverage sort of gold price in that that we can talk about?

Scott Caldwell

The cut-off grade in the resource is 0.005 gold equivalent. So the same in the heap leach so we have a portion if you look at the stream and you look at the study. That would be for the run-of-mine ore, and then we crush the high-grade increments. And so, it’s a combination of run-of-mine plus crushed ore.

Sam Crittenden – RBC Capital Markets

Okay. And what sort of recovery are you expecting?

Scott Caldwell

On the crushed material, the run-of-mine is pretty poor. It’s about 40% recovery. On the crushed material, gold recovery jumps to about 60% and about 14% on the silver.

Sam Crittenden – RBC Capital Markets

For run-of-mine sort of recovery, what do you think?

Scott Caldwell

That’s 40% on the gold, and silver is down around 3% or 4%; very poor recovery on the run-of-mine material.

Sam Crittenden – RBC Capital Markets

Okay. And can you talk a bit about the exploration plans for this year at Hasbrouck?

Scott Caldwell

Sure. At Hasbrouck, a couple of places we’re going to working. I call it Hasbrouck. It’s actually a satellite deposit called Three Hills. We’re going to expand. We’re going to do some work on that. We did not drill on that in 2011. Want to expand that small resource. And it sits at about 130 million contained ounces right now. And we’re going to also be working on the hill proper at Hasbrouck seeing if these high-grade zones continue at depths in the north-south direction.

And then also probably the first place we’re going to drill is what we call, Klondike Flats or (inaudible) zone. The (inaudible) zone is a little bit closer to the hill, when I say from the hill, maybe three kilometers from the Hasbrouck Mountain or Hasbrouck Hill. We had some joy on that area late in the year and I need to follow up on that and so we really see this as a start of a district play, and we’re still very excited about what this could mean to us. But right now, the 135,000 ounces a year or so, it’s about 20% production bump to us even when the mill is running at Hycroft.

Operator

Your next question comes from the line of Brian Christie of Desjardins Securities. Please go ahead.

Brian Christie – Desjardins Securities

Just wondering how, if you can give us an effective tax rate for 2012.

Hal Kirby

For 2012, we’re expecting it to be right around 25%.

Operator

Your next question comes from the line of Steve Butler of Canaccord Genuity. Please go ahead.

Steven Butler – Canaccord Genuity

Coming back to Hasbrouck PA, can you estimate what the CapEx synergies or benefits are from transferring some of that equipment down from Hycroft? I assume it’s a reasonable amount of CapEx savings that you’re talking about.

Scott Caldwell

Yes. If we bought that mining fleet new and it’s a total of six 200-ton haul trucks, two EX3500 drills, etcetera. So, we believe new, that fleet would cost somewhere around $40 million to $50 million. I call it $40 million. And that’s why we’re able to get this mine running for an initial capital of $78 million because we’re bringing all of that equipment down there. So, it’s a nice synergy for us. It’s the right stuff for this job and it’s in a great shape. We’ll do some minor rebuilds on some of it before goes down there, but it’s in good shape.

Steven Butler – Canaccord Genuity

And Scott, just to be clear, it’s the equipment that you don’t really need in the...

Scott Caldwell

Right.

Steven Butler – Canaccord Genuity

… material for Hycroft?

Scott Caldwell

Exactly.

Steven Butler – Canaccord Genuity

Okay.

Scott Caldwell

As we bring in the larger trucks, the 320-ton trucks and the EX5500s and then finally the big large electric rope shovels, the CAT 7495s or 70-cubic-meter shovels. Those will replace all of the smaller stuff that we’re still running right now. So, when we need it down in Hasbrouck it will be ready to go.

Steven Butler – Canaccord Genuity

Is your goal, Scott, to get these ounces still on carbon stripped up somewhere by the end of the first quarter or could be a lag into Q2 as you...

Scott Caldwell

There could be still a lag in the Q2. A matter of fact, I think there will be a lag in the Q2. We’re talking with people in the state that have expressed an interest in doing this. If we have to build our own plant and from that, it’s about $1.5 million to $2 million for this plant, it’s a modular plant. We’re going to have to receive an air quality permit to operate the carbon regen kiln. And so, to get that permit would be critical path. That could take up to a year. So, we have to be there ourselves. We’re running the carbon columns. We’ll continue to load carbon. So, obviously, we think we’ll be able to place it. The other solution, if we did decide not to continue to run the carbon columns with stack solutions, gold wouldn’t go anywhere, but it would be in solution not on carbon. So, we’re going to continue to run the carbon until we could find a way to process it.

Steven Butler – Canaccord Genuity

Okay. The Oscar target, maybe a brief discussion of that. Is it still early days or has there been drilling down on Oscar before or what’s the plan this year?

Scott Caldwell

There has not been any drilling that we’re aware of at Oscar. We intend to begin drilling on that. Again, our focus has been engineering drilling at Hycroft. And so, we’d like to start to drill on Oscar either in the second quarter or third quarter. It’s an anomaly that we really want to test. And just to recap, Oscar is about, from our mine site, probably 7 kilometers to 10 kilometers south of the drill line. So, we’re excited about what it is and really want to get out there and test it, but we haven’t drilled it yet.

Steven Butler – Canaccord Genuity

Yeah. It’s okay.

Scott Caldwell

It’s permitted, ready to go since really, it’s the weather right now where we can tell until we know we’re not going to get snowed, then we’ll go up and drill it.

Steven Butler – Canaccord Genuity

Okay. Great. Last favor for Hal. Maybe you can talk to me offline. Hal, give me a call. But the corporate G&A nine months and full year seem to be both the same number unless there is maybe reallocation from one category to the next. Hal, maybe you can elaborate?

Hal Kirby

Yeah. At the end of the year, it was about $2 million of development-related expenses. We moved it into exploration development and land-holding cost.

Steven Butler – Canaccord Genuity

Okay.

Hal Kirby

And the reason being is those costs were more closer to the expiration that they used the developer to advance the projects as opposed to general corporate G&A. So, it would be feasibility-related cost primarily.

Steven Butler – Canaccord Genuity

And so, what would be a decent enough corporate G&A number guidance for 2012, Hal?

Hal Kirby

It’ll be about $1 million more than what we have this year.

Steven Butler – Canaccord Genuity

Somewhere like $25 million?

Operator

Your next question today comes from the line of (inaudible) a private investor. Please go ahead.

Unidentified Analyst

Yes. Someone already asked that question, so I don’t have that question anymore, but main question related to how long it would take you to develop your other properties and what’s the plan for that? And second question, what is your expectation of gold and silver prices for 2012?

Scott Caldwell

Okay. I’ll take the first part of the question and try the second one. But on the development of the other properties, we spend a little bit of time talking about Hasbrouck. That’s our furthest advanced property. And we already have begun permitting the baseline studies required to receive the permits to construct and operate. And so, we hope to have that permit by the middle of 2014 so we can construct the thing.

On the other projects, we’ve got little bit of resource at Wildcat. Oscar, we do not have resource on it, and so Wildcat, we’d like to drill it. It’s up high in elevation. It’s about maybe 25 meters to 3,000 meters in elevation. So, we’re waiting until the winter is over and get up and drill on Wildcat. It’s really a function of when we find a resource. But between when we discover something and/or complete the PEA and get it permit, you’re looking at it couple of years for each one of these, minimum timeframe to permit it. So, really, permitting becomes a key.

So, in our next step hopefully this year, this exploration season, we can expand one of these unknown resources and get enough information to complete the scoping study and get something else out of the pipeline. So, maybe we’ll be talking about the third mine, the development of the third possible mine in a year or so. But permitting is always going to be a critical timeline for us.

Unidentified Analyst

Okay. And do you allow someone like me to visit your facility or how does one do that?

Scott Caldwell

Oh, yeah, absolutely. Anytime that you’d like to tour the site. If you just get a hold of Tracey or I and say, “Hey, would it possible to visit the facility?” We’re very proud of what’s going on out there and show you our environmental health and safety systems, the production. And we’d love to take you around.

And finally, as to gold price, I have no idea. We’re obviously a lot more conservative, we run our oil reserves at $800 gold. We do our cash forecast and typically at $1,200 gold. We’re trying to say, “Okay, how much cash will we generate in a given period of time?” It’s just I’ve been with the business a long time and I’ve seen the other side of this, i.e., low gold prices. So, we’re pretty conservative on the gold prices.

Operator

Your next question comes from the line of John Tumazos of John Tumazos Very Independent Research. Please go ahead.

John Tumazos – John Tumazos Very Independent Research

You touched on my question but maybe I could repeat it. For your large projects at Hycroft with potentially (inaudible) and Hasbrouck, when will you have a final plan of operations to describe to the regulators to begin permitting? I think you mentioned mid-2014 for Hasbrouck for the earliest timetable, time the permits at hand.

Scott Caldwell

On Hasbrouck, John, we hope to submit that plan of operations and the plan of operations we’ve already begun work on, i.e., the PEA is the foundation or the start of it would be a heap leach followed by a mill that would be included in the plan of operations. We hope to get that. That’s really when the permitting can begin in earnest and so, we’re really hoping to have that ready by June. Our plan of operations, obviously for the permitting work at Hycroft on a heap leach has been submitted. And that’s continuing to advance. So, June of this year, hopefully, we’ll be able to permit that or submit that plan of operations to the BLM which would be the regulatory at Hasbrouck as well.

John Tumazos – John Tumazos Very Independent Research

In terms of the sulfides and treatment of the sulfides at the Hycroft deposits which are obviously large, when do you think the timetable will be for moving ahead with the permeating there?

Scott Caldwell

On the sulfides or the mill, it’s a good question. The mill itself, we permit and we run. We believe that the location we’ve chosen for the future mill site, as well as a gyratory pressure that we just talked about. But we do have improvement to be in construction. Is it located on private or patent in mining planes?

We believe we’ll begin construction on the mill on early 2013, so this is not a gyratory. Now, I’m talking about the actual mill itself. And the mill, once it’s completed, if you looked at our mine plan in detail, we actually don’t mine sulfide material for a number of years. We stay out of the sulfide material. The real sulfide or in our case, the real critical path and permitting is when you enter the water table with your mining, by nature, all of the oxide or transitional ores are dry. They are not in a groundwater table. And you can see from our resource announcement or reserve announcements that came out of that, 50% of our gold is contained in dry ore.

So, we can mine that without this last permit that we’re talking about, the mine and the sulfides and anyway, long drawn out story we anticipate being able to start to mine into the water table sulfide material now in 2015.

So, with this vast and un-oxide/transitional material we’ve got, it really looks like we’ve got a, I wont say a leisurely timeframe but we don’t need that sulfide permission or the permission to mine at the water table until, well, we’ve got a number of years from when we start production.

John Tumazos – John Tumazos Very Independent Research

So, you’ve got three or four years to retain earnings to finance $1 billion metallurgical plan or whatever it would take?

Scott Caldwell

Exactly. We’ve kind of have processed the sulfides.

John Tumazos – John Tumazos Very Independent Research

Right, right. Now the U.S. government sometimes does things that we don’t understand as Americans, Scott but (inaudible) has been very aggressive with Yukon-Nevada to your east and Hakua in Idaho and in the case of Yukon-Nevada, I’m not aware that they ever had a fatality in 30 years at Jerritt Canyon. But I suspect that the issues really are airborne emissions. If you run an autoclaves, you should be zero emissions and do you foresee having a tough regulatory climate the way, for example, the three rosters operating in Nevada rig seem to concern the emissions people?

Scott Caldwell

You’re correct, John. We actually did extensive test work on what you would do with the sulfide material or the refractory material to get the gold and silver out to oxidize it and the two alternatives that work the best were autoclave and roaster. We actually get similar recoveries in both, but we chose the autoclave because of the emissions issue or potential issue.

John Tumazos – John Tumazos Very Independent Research

Closed circuit?

Scott Caldwell

The closed circuit, so I’ll use the term “easier to permit.” And so, we selected that as a way to go if indeed we build an on-site oxidation circuit.

Operator

(Operator Instructions). Your next question is a follow-up from the line of Steve Butler of Canaccord Genuity. Please go ahead.

Steve Butler – Canaccord Genuity

Hello, Scott. I got just a couple of more here. The gyratory crusher, what would be your rough timing of insulation and/or start-up of the gyratory crusher at Hycroft?

Scott Caldwell

The gyratory and the crusher itself, so I’m talking about the chunk of metal that we drop in, does not arrive on site until the fourth quarter of 2012. So, we’re hoping to install it the first part of '13 and have it fully operational by mid-'13.

Steve Butler – Canaccord Genuity

Okay. And the mining cost, it’s pretty good numbers here in terms that you said the first shovel, hydraulic shovel installed or a few operational led to a 30% reduction in mining cost, I guess more to come. Is that on a unit cost of that?

Scott Caldwell

Yes.

Steve Butler – Canaccord Genuity

The shovel with the truck – sorry?

Scott Caldwell

That’s on a unit cost basis. And so, if you look at our mining cost, it declined by 30% on a per ton basis. But it was a function of, obviously, brand-new equipment. So much lower offered in cost, just in general because it’s unwarranted, if you’d like, and more tons, right? The tons bumped as soon as we got the loading. We’re loading limited right now.

Steve Butler – Canaccord Genuity

And so, I mean so you continue to concentrate the second and third shovels, I guess, here. What are we talking about in terms of your mining cost per ton as you go for 2012 or maybe I should end 2012 with the third shovel on it?

Scott Caldwell

Our goal is to have our mining cost per ton at $1.31 per ton. That’s our target. We’re sitting right now at about $1.70.

Operator

Your next question comes from the line of Tara Hassan of National Bank Financial. Please go ahead.

Tara Hassan – National Bank Financial

Scott, just to touch on the reserve and resource update from Friday, can you give us some intel into how the grades move around when you look at the increased metal prices. Obviously, as you move up to long-term prices in the range of $1,200, pretty big bump on contained ounces but what’s the impact on the grades of gold and silver?

Scott Caldwell

Yes, obviously, the grades decline because, there will be some cross sections posted on our website and you could see how dramatic and we have a huge amount of tonnage and the grades decline, silver or gold grades declined from where they’re sitting right now which would be about 1 ounces a ton to 010. So, we’re way out there on the decimals.

And silver grade declined as well. It goes down to about 04. So, if you move to about a $1,000 gold. So we get a lot of ounces out there on the fringes here and quite frankly, if you look at the grade tonnage curves and they’ll be published in the feasibility study again, you’ll see that it just stops no matter what kind approach you go to and it’s really a function of the drill-limited nature of the thing. It’s to the Southwest. It’s still wide open, but we’re just basically behind of gold price if you take everything that’s got gold and silver in it.

Tara Hassan – National Bank Financial

Okay. And once you noted a slight reduction on the cut-off grade on the back of higher assumed recoveries. So what are you guys modeling now?

Scott Caldwell

Cut-off grades themselves now dropped by about 5% and it’s basically additional test work, confirmation metallurgical test work. It seems like it never ends; all the testing we’re doing all the time on the milling ores as well the heap leach ores and we’re seeing slightly better recoveries and we just use those updated numbers and if it had gone the other way, we would assume the recovery go up. So, it’s moved very slightly. It’s moved by maybe 3% or 4% on a gold equivalency basis.

Operator

Your next question comes from the line of Shawn Campbell of Macquarie. Please go ahead.

Shawn Campbell – Macquarie

Just two quick questions. One is I’ve noticed that there’s now long-term ore on the leach pad, non-current. I guess my understanding was that the gold leach in about 12 months, what does the long-term ore relate to?

Hal Kirby

The long term, it does leach in about 12 months. The issue is that’s from the time where we you get solution breakthrough. So, there’s about a three or four-month lag as you place solutions on newly placed ore or at the higher ends of our leach pad. And so, in effect, it kind of extends the leach curves slightly beyond the 12-month period which is why basically 15% of the leach pad gold will be recovered after that first year. And then obviously with all lead pads we have kind of a very long tail at the very end of the mine life.

Shawn Campbell – Macquarie

Okay. And then just in terms of the capital plan for next year, the $225 million, what part of that would be considered sort of mine development, stripping or just earth moving as part of that $225 million?

Scott Caldwell

Hal, you want to take that or you want me to go through it?

Hal Kirby

Sure. Yeah, no, that’s fine. There’s about $20 million of it that is related to stripping and it's not stripping. It’s actually the preparation of the size for the crusher. We do not have any other earth-moving development work if it’s going to be capitalized.

Shawn Campbell – Macquarie

Okay. And then just in the press release, the $355 million, 30% of the $1.2 billion, it says that this is what's been spent and committed?

Scott Caldwell

Yes.

Shawn Campbell – Macquarie

So what portion of that isn’t spent and is only committed right now?

Scott Caldwell

Well, I’ll just start with some generalities. The bulk of it is not spent. In other words, for example, the mining, the electric mining shovels, an additional 20-odd trucks or so have been committed to. We’ve got firm prices and we have put down payment, if you’d like, on the shovels but that would be $150 million that we haven’t actually bought or purchased yet.

The mills are the same things. The mills were about $90 million. We had to put money upfront to order them, and then we make progress payments as the construction or the manufacturing process of the mills take place. So, Hal probably has the exact number but about 20% of that has been, if you’d like, spent on down payments, a little less than that. The rest is committed to.

Hal Kirby

About $65 million has been spent versus committed.

Operator

And your next question is a follow-up from the line of Tara Hassan National Bank Financial. Please go ahead.

Tara Hassan – National Bank Financial

What’s the timing for your update on the Hycroft feasibility?

Scott Caldwell

We’ll have that out. The document itself will be published, a new annualized mine plan and quite frankly, what happens is that it just gets longer with, there is a (inaudible) edition. But that will be out sometime early March, maybe before March 15. How’s that? The work has been done. It’s just pooling the report together. It always seems to take a while.

Tara Hassan – National Bank Financial

And then just going back to Hasbrouck quickly, on your baseline work, where are you in that process? Has anything been collected or it’s a process just getting...

Scott Caldwell

On the baseline work, we’ve done the archeological and flora and fauna surveys. In other words, had consultants go out and conduct all of that work. We have tried to find water for the water baseline work in and around the immediate proposed mine area and we can’t find any water. So tough to do a water quality model when we don’t have any groundwater there.

This is all oxide and you’ve seen the photos of it. Really, we’re kind of mining a little mountain or a hill off. And so, it’s above well, we can’t find the water table. So, our water would have to be probably pumped from five or 10 miles away, which is included in the cost estimate.

So we’ve began on the water and the other archaeological and flora and fauna work, had a couple of public meetings where we just discuss what the project was and wasn’t. John Tumazos has asked about those plan of operations, we’ve got to get that plan of operations finished, which is essentially a life-of-mine plan, showing all the infrastructure, tails and facilities, heap leach pad, et cetera, waste dumps, get that in front of the BLM and then we’re in that timeframe to get the approval of beginning construction.

Tara Hassan – National Bank Financial

Okay. And I know that the plan of operations, do you look to expand the resources this year? Would you be looking to bring on a mill...

Scott Caldwell

Yes. In the plan of operations we would reflect the mill. In the PEA we will share with all of you the capital. We have a capital cost estimate developed for 6,000 kind of a mill. We’ll show you that and you can see the capital cost and on and on and on. For the record it’s about $90 million.

And so, wait for the mill and tail stand facility. And so, we’ll show that and that would be in the plan of operations. I’m optimistic. I think we are optimistic at Allied that we’re going to have enough of this high-grade feed that you surely wouldn’t want to throw it on heap leach like the north, right?

Tara Hassan – National Bank Financial

And is that something that comes on sort of as a second-phase development or at the start of the operation?

Scott Caldwell

Yes. We envision it. In this study, you we just show straight heap leach because the resources are small at 1.2 million ounces. But we envision using the cash flow from the heap leach to fund the mill and so, yes, it would be a phased approach. So perhaps a mill would go in and begin construction in year two and be operational in year three. But that’s the way we envision it with the mill and that’s the way we would reflect it once the resource gets a little bit larger. We’ll show the mill get dropped in. So, using our operating cash flow to pay for the mill.

Operator

Mr. Caldwell. There are no further questions at this time. Please continue.

Scott Caldwell

Well, in conclusion, I think Allied has had a pretty darn good year. We have excellent health, safety and environmental performance. It’s real credit to the men and women working out in the field. We had record gold production despite our delivery problems that we’ve been suffering through. And at $488 an ounce, we still have some pretty attractive costs.

The strong earnings at roughly $0.41 a share and I think we’re showing that we can continue to deliver growth through the drill bit expanding reserves at Hycroft and laying the foundation for our second mine in Hasbrouck.

The heap leach had no expansion and advancing. Construction on the gyratory crusher will begin next month, which is exciting for us because that’s not only key element of the oxide or the heap leach expansion. It’s also the first chunk of the mill itself.

So, the team at Allied, we’re really focused on delivering U.S. based organic growth through the drill bit and we’re excited about the developments that the coming year hold for us. Anyway thanks again for spending some time with us this morning, and we’ll talk soon.

Operator

Ladies and gentlemen, this concludes today’s conference call. We thank you for your participation and you may now disconnect your lines.

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