| Thu 15 Nov 2007, 16:34 | | GFI - Gold Fields Announces A Delay And An Increas |
|
GFI
GOGOF
GFI - Gold Fields Announces A Delay And An Increase In Capital Cost For The
Cerro Corona Project In Peru
Gold Fields Limited
(Reg. No. 1968/004880/06)
(Incorporated in the Republic of South Africa)
Share Code: GFI
ISIN Code: ZAE000018123
MEDIA RELEASE
GOLD FIELDS ANNOUNCES A DELAY AND AN INCREASE IN CAPITAL COST FOR THE CERRO
CORONA PROJECT IN PERU
SEE TELECONFERENCE DETAILS BELOW
Johannesburg, Thursday, 15 November 2007. Gold Fields La Cima, which is
80.72% owned by Gold Fields Limited ("Gold Fields") (NYSE, JSE, DIFX: GFI),
today announced a four month delay and a revised capital forecast for the
Cerro Corona gold/copper project in Peru.
The construction costs for the project was previously estimated at
approximately US$343 million and the treatment of ore was scheduled to
commence early in the March quarter 2008.
The construction costs has now been revised to US$421 million, which includes
an additional contingency of US$20 million, and the treatment of ore is now
scheduled to commence towards the middle of the June quarter 2008.
The delay is mainly due to two issues:
- Deficient progress on the construction of the tailings management
facility (TMF) caused by poor rock quality in the project quarries, and
inadequate material delivery rates required for the construction of the
TMF embankment; and
- Underperformance over the past two months by several contractors
responsible for the structural and mechanical installation of the
concentrator.
Commenting on the announcement, Ian Cockerill, Chief Executive Officer of Gold
Fields, said:
"While we are disappointed with the delay and the increased construction
costs, Cerro Corona remains a robust project and will make a significant
contribution to the future of Gold Fields. We have thoroughly reviewed every
facet of this project and I am confident that the required steps have been
taken to ensure completion within the revised project schedule and budget."
The first significant cause of the delay is the recent poor progress in the
construction of the TMF, which was previously highlighted as the greatest risk
to the project cost and schedule. Clearing and preparation of the embankment
footprint was completed in June 2007 and construction of the various zones in
the embankment commenced in early July. The materials required for the
construction of the embankment, which are sourced from quarries on the project
site, must meet strict geotechnical, geochemical and structural standards,
some requiring significant processing to generate proper size gradations. Two
crushing and screening plants have been erected on-site for this purpose.
Since the commencement of the construction of the embankment in early July,
production of acceptable construction material has been substantially slower
than anticipated due to poor rock quality encountered in the quarries, and a
slower than expected ramp up in the optimization of the crushing and screening
plants. Both of these factors have now been incorporated into a revised
project schedule, leading to the delay in the completion of the Project.
The second contributing factor to the delay is poor construction efficiencies
achieved over the past two months by several contractors responsible for the
construction of the concentrator. Despite an acceleration plan developed to
complete the construction of the concentrator in December 2007, certain tasks
were not timely completed in the last eight weeks, particularly with regards
to the completion of critical early commissioning areas of the plant. This has
led to knock on delays to the electrical contractor, hence the overall impact
on completion timing.
There are four main causes of the increase in construction costs:
1. The delay in the completion of the Project attracts significant
additional costs in terms of management and engineering personnel, as
well as attendant indirect or support costs such as the maintenance of
the remote onsite camp and other services such as bussing and meals.
2. An increase in the construction costs for the TMF due to higher unit
rates for mining and crushing of construction materials.
3. Poor ground conditions have been encountered in the construction of the
various facility platforms as well as mine and access road construction.
This has necessitated additional cut and fill activities to ensure the
stability of the various structures.
4. Continued escalation of commodity based products, such as electrical
cabling and power lines as well as the piping and mechanical and
electrical components of the tailing management systems, has had a
significant impact on the overall cost of the project.
The Cerro Corona gold copper project is located 80km from the City of
Cajamarca in the highlands of northern Peru. A decision was taken to commence
with this project in January 2006 following approval of the Environmental
Impact Assessment in December 2005.
The Project involves the development of a single surface mine producing 6.2
million tons per annum (mtpa) of ore at a life of mine stripping ratio of
0.58. This ore will be treated in a conventional milling and sulphide
flotation concentrator treating 6.2 mtpa of ore and producing between 100,000
and 140,000 tons per annum of copper and gold containing concentrate, which
will be custom treated at smelters in Japan, Korea and Europe.
The Project currently has reserves of some 3.2 million ounces of gold and
1,089 million pounds of copper, equivalent in total to some 5.9 moz of gold
equivalent. Resources are 5.0 million ounces of gold and 1,869 million pounds
of copper*.
Average life of mine metal production is projected to be some 140,000 ounces
of gold and 27,000 tons of copper per annum, though production levels will be
somewhat higher in initial years due to high grades encountered in the shallow
portions of the pit.
Cash costs in the first four years of the mine life are projected to be
between US$300 and US$330 per gold equivalent ounce in real terms and based on
current market conditions.
The cost trends that have been seen in construction of the TMF, discussed
earlier, have been projected in the estimated life of mine capital cost for
this facility and are expected to increase life of mine capital costs from
approximately US$10 per ounce to US$30 per ounce of gold equivalent
production. Work remains underway to develop alternative methods for managing
the tailing, with a view to improving this cost.
*Reserves reported at 31 December 2006, using prices of US$500/oz gold and
US$1.25/lb copper and resources using prices of US$650/oz gold and US$1.75/lb
copper.
ends
TELECONFERENCE DETAILS
Slides available on website at www.goldfields.co.za
For Johannesburg: 16:45
For United Kingdom: 14.45 hours GMT
For Europe: 15:45 hours, European time
For North America: 09:45 a.m., Eastern time
DIAL IN NUMBERS
South Africa Toll: 011 535 3600 Toll-free: 0800 200 648
USA Toll: 1 412 858 4600 Toll-free: 1800 860 2442
Australia Toll-free: 1800 350 100
United Kingdom Toll-free: 0800 917 7042
Canada Toll-free: 1 866 519 5086
Europe and other Toll: + 41 916 105 600 Toll-free: + 800 246 78 700
Ask for Gold Fields call
SIMULTANEOUS AUDIO WEBCAST
Available at our website, www.goldfields.co.za
DIGITAL REPLAY AVAILABLE ONE-HOUR AFTER CALL
Playback code: 2541#
(Available for seven days)
South Africa & Other: + 27 11 305 2030
USA: 1 412 317 0088
United Kingdom: 0808 234 6771
Europe: + 41 91 612 4330 (Switzerland)
Australia: 1 800 091 250
CONTACTS
Willie Jacobsz
Phone: 27 11 644 2460
Fax: 27 11 484 0639
williej@goldfields.co.za
Nerina Bodasing
Phone: 27 11 644 2630
Fax: 27 11 484 0639
Nerina.Bodasing@goldfields.co.za
Francie Whitley
Phone: 27 11 644 2505
Fax: 27 11 484 0639
Franciew@goldfields.co.za
Date: 15/11/2007 16:34:24 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
