| Thu 29 Jan 2004, 11:44 | | Quarterly Report |
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Gold Fields Limited - Quarterly Report
Gold Fields Limited
Incorporated in the Republic of South Africa
Registration number 1968/004880/06
Share code: GFI
Issuer code: GOGOF
ISIN: ZAE 000018123
NEWS RELEASE Q2 F2004 RESULTS
Quarter Ended 31 December 2003
-Unaudited-
STOCK DATA
Number of shares in issue
- at 31 December 2003 491,147,202
- average for the quarter 484,511,921
Free Float 100%
ADR Ratio 1:1
Bloomberg / Reuters GFISJ / GFLJ.J
JSE SECURITIES EXCHANGE SOUTH AFRICA (GFI)
Range - Quarter ZAR81.90 ZAR105.01
Average Volume - Quarter 1,447,300 shares / day
NYSE (GFI)
Range - Quarter US$12.32 US$15.33
Average Volume - Quarter 1,565,600 shares / day
INVESTOR RELATIONS
Europe & South Africa
Willie Jacobsz Nerina Bodasing
Tel : +27 11 644-2460 Tel : +27 11 644-2630
Fax: +27 11 484-0639 Fax : +27 11 484-0639
E-mail: investors@goldfields.co.za
North America
Cheryl A. Martin
Tel: +1 303 796-8683
Fax: +1 303 796-8293
E-mail: camartin@gfexpl.com
www.goldfields.co.za www.gold-fields.com
Second Quarter Headline Earnings increased 52 per cent
to R249 million (US$36 million)
JOHANNESBURG. 29 January 2004 - Gold Fields Limited (NYSE & JSE: GFI) today
announced December 2003 quarter net earnings of R277 million (57 cents per
share) compared to net earnings of R421 million (89 cents per share) in the
September 2003 quarter and R817 million (173 cents per share) for the
December quarter in 2002. In US dollar terms the December 2003 quarter net
earnings were $42 million (US$0.09 per share) compared with $57 million
(US$0.12 per share) in the September 2003 quarter and $83 million (US$0.18
per share) for the December quarter in 2002.
Second quarter highlights included:
* Attributable gold production of 1.05 million ounces achieved, ahead of the
September quarter.
* Total cash costs decreased 1 per cent in rand terms to R66,991 per kilogram
and increased 9 per cent in US dollar terms to $308 per ounce.
* Operating profit of R545 million (US$80 million), 4 per cent down in rand
terms from the previous quarter as a result of the lower rand gold price.
In US dollar terms a 5 per cent improvement was achieved.
* Global diversification continues with value adding acquisitions in both
China and South America.
Ian Cockerill, Chief Executive Officer of Gold Fields said:
"During the December quarter all operations performed satisfactorily and to
expectation, with the exception of Driefontein which was adversely affected
by fires at 4 west and 5 west shafts in the high grade areas. Fortunately,
the fires have now been contained and Driefontein is expected to return to
planned performance levels over the next two quarters."
"In line with the previously stated desire to deal with a firmer yet volatile
rand operating environment, this quarter has been characterised by a reduction
in lower grade mining, an increase in old gold recovery and a critical review
in cost expenditures all aimed at increasing margins during this challenging
period. The company is on target to reposition the South African assets by the
end of the March quarter, but benefits have already been seen at the various
mines."
"We are pleased with the response to the international placing of US$225
million concluded during the December quarter as this provides funds for both
organic growth and acquisitions."
Salient features
SA Rand
Six months to Quarter
Dec Dec Dec Sept Dec
2002 2003 2002 2003 2003
Gold produced* kg 69,093 64,779 33,930 32,299 32,480
Total cash costs R/kg 61,528 67,277 61,853 67,566 66,991
Tons milled 000 21,271 23,137 10,560 11,497 11,640
Revenue R/kg 102,808 85,511 100,969 86,184 84,842
Operating costs R/ton 223 203 222 204 202
Operating profit Rm 2,897 1,114 1,319 570 545
Net earnings Rm 1,359 699 817 421 277
Net earnings SA c.p.s. 288 146 173 89 57
Headline earnings Rm 1,255 413 714 164 249
Headline earnings SA c.p.s. 266 86 151 35 51
Net earnings excluding
gains and losses on
financial instruments
and financial
instruments and
foreign debt net
of cash and
exceptional items Rm 1,309 247 574 136 111
Net earnings excluding
gains and losses on
financial instruments
and financial
instruments and
foreign debt net
of cash and
exceptional items SA c.p.s. 278 52 122 29 23
*Attributable All companies wholly owned except for Ghana (71.1%).
Salient features
US Dollars
Quarter Six months to
Dec Sept Dec Dec Sept
2003 2003 2002 2003 2002
Gold produced* oz (000) 1,045 1,038 1,091 2,083 2,221
Total cash costs $/oz 308 282 197 295 190
Tons milled 000 11,640 11,497 10,560 23,137 21,271
Revenue $/oz 390 360 321 375 318
Operating costs $/ton 30 27 23 29 22
Operating profit $m 80 77 136 157 288
Net earnings $m 42 57 83 98 135
Net earnings US c.p.s. 9 12 18 21 29
Headline earnings $m 36 22 72 58 125
Headline earnings US c.p.s. 7 5 15 12 26
Net earnings excluding
gains and losses on
financial instruments
and financial
instruments and
foreign debt net
of cash and
exceptional items $m 17 18 59 35 130
Net earnings excluding
gains and losses on
financial instruments
and financial
instruments and
foreign debt net
of cash and
exceptional items US c.p.s. 3 4 13 7 28
*Attributable All companies wholly owned except for Ghana (71.1%).
Overview
In line with expectations, earnings were lower than the September 2003
quarter, at R277 million (US$42 million). This is due to the stronger rand
and a reduction in exceptional earnings, arising mainly from the profit on
the sale of certain mineral rights and associated assets to AngloGold
included in the September quarter. The sale of these mineral rights
bolstered earnings by R240 million (US$32 million) in the September
quarter.
The Group"s attributable gold production for the December quarter at 1.045
million ounces is marginally above the September quarter. The decrease
at Driefontein, due to the 4 west and 5 west fires, was offset by increased
production at the other operations.
Total cash costs in the December quarter decreased marginally from
R67,566 per kilogram to R66,991 per kilogram due to the increased
production and stronger rand. The increase in US dollar terms was 9 per
cent from US$282 per ounce to US$308 per ounce due to the rand
strengthening 9 per cent from R7.44 to R6.76 to the US dollar.
Health and safety
During the quarter the lost day injury frequency rate at the South African
operations improved from 15.8 to 15.4, the serious injury frequency rate
regressed from 7.2 to 7.9 and the fatal injury frequency rate regressed from
0.31 to 0.34. Management is disappointed with this regression from what
has previously been an improving trend. All efforts are being directed
towards reversing this phenomenon.
Financial Review
Quarter ended 31 December 2003
compared to quarter ended
30 September 2003
REVENUE
Revenue is marginally lower than the previous quarter due to a lower rand
gold price as a consequence of a 9 per cent strengthening of the average
rand/US dollar exchange rate from 7.44 in the September 2003 quarter to
6.76 this quarter. The US dollar gold price of US$390 per ounce was
however 8 per cent higher than the US$360 per ounce achieved in the
September quarter. The resultant rand gold price of R84,842 per kilogram
is thus 2 per cent lower than the R86,184 per kilogram achieved last
quarter. The lower gold price was partly offset by the higher gold sales at
34,451 kilograms (1,108,000 ounces) as compared to 34,257 kilograms
(1,101,000 ounces) last quarter. This resulted in revenue of R2,923 million
(US$431 million) compared to R2,952 million (US$397 million) last quarter.
OPERATING COSTS
Operating costs at R2,355 million (US$347 million) for the quarter were
less than 1 per cent higher than the previous quarter"s costs of R2,342
million (US$315 million). At the South African operations, costs increased
1 per cent compared to the previous quarter. This was mainly due to the
additional costs at Driefontein, due to the opening up of additional areas as
a result of the underground fires. Costs at Kloof and Beatrix were
unchanged from last quarter despite increases in production. At the
international operations costs were flat in rand terms at R655 million
(US$96 million) for the quarter.
OPERATING PROFIT MARGIN
The net effect of the lower revenue and marginally higher costs, partly
offset by a lower gold in process charge resulting from a reduced net
release of inventory at the international operations, was a decrease in
operating profit from R570 million (US$77 million) in the September quarter
to R545 million (US$80 million) this quarter.
The operating margin for the Group remained at 19 per cent for the current
quarter. This is despite a decline in margins at the South African
operations from 11 per cent in the previous quarter to 7 per cent in the
current quarter. The decline at the South African operations resulted from
reduced production levels at Driefontein and the lower rand gold price. The
margin at the international operations increased from 34 per cent last
quarter to 38 per cent this quarter, with all operations showing an
improvement.
AMORTISATION
Amortisation was slightly higher than the previous quarter at R308 million
(US$45 million), in line with the increased production.
FINANCIAL INSTRUMENTS AND DEBT
The Australian dollar once again strengthened against the US dollar, from
68.14 US cents at the end of the September quarter to 73.41 US cents at
the end of the current quarter. Outstanding debt at the Australian
operations reduced from US$19 million at the end of the September quarter
to US$11 million by the end of December. A small loss on the debt, net of
cash in Australia of R5 million (US$1 million) due to the revaluation of cash
balances in US dollars, was offset by an exchange gain of R65 million
(US$9 million) on funds held offshore arising from the share issue last
quarter. The net result is an exchange gain of R60 million (US$8 million)
for the quarter.
As previously reported, the Australian operations established currency
financial instruments to protect their underlying cash flows against a
possible strengthening of the Australian dollar against the United States
dollar. At the quarter end, US$288 million was outstanding under these
instruments. Gains on these financial instruments amounted to R143
million (US$20 million) in the current quarter compared to R68 million
(US$9 million) in the previous quarter. At the end of the December quarter,
the marked to market value of these US dollar/Australian dollar financial
instruments was a positive R706 million (US$103 million).
The gain on the above financial instruments was partially offset by an
unrealised loss of R23 million (US$3 million) on the SA rand/US dollar
forward cover of US$50 million. These forward purchases are to hedge the
Group"s commitment in respect of the Tarkwa mill and owner mining
projects approved at US$159 million, to the extent that these projects are
funded from South African sources. During the quarter US$10 million was
purchased in addition to the US$40 million held at the end of the
September quarter. In the September quarter the unrealised loss
amounted to R32 million (US$4 million). The weighted average forward
rate in respect of the forward cover is R8.4264 to the US dollar and
maturity is on 3 June 2004. The marked to market value of this forward
purchase at the end of the quarter was a negative R64 million (US$9
million negative).
On 7 January 2004, Gold Fields Australia entered into equal and opposite
transactions regarding the Australian dollar/United States dollar currency
financial instruments. The existing forward purchases of Australian dollars
and the put and call options were closed out by entering into equal and
opposite transactions. The close out of the outstanding open position of
US$275 million was at an average spot rate of 0.7670 US$/AU$. These
transactions locked in gross profit amounting to US$115.7 million and the
underlying cash receipts were deferred to match the maturity dates of the
original transactions. An amount of US$102.8 million has already been
accounted for up until the end of December 2003. In addition, in order that
the Group is able to participate in further Australian dollar appreciation a
strip of quarterly maturing Australian dollar/US dollar call options were
purchased in respect of an amount of US$275 million of which the value
dates and amounts match those of the original structure. The Australian
dollar call options resulted in a cost of US$8.3 million, which was also
deferred to match the maturity dates of the original structure. The average
strike price of the options is 0.7670 US$/AU$.
Details of the financial instruments are provided on page 11 of this report.
EXPLORATION AND OTHER
Exploration decreased, from R55 million (US$7 million) in the September
quarter to R35 million (US$5 million) in the December quarter largely as a
result of timing of certain expenditures.
EXCEPTIONAL ITEMS
Profit before taxation and exceptional items increased 29 per cent to R370
million (US$54 million) compared to R287 million (US$39 million) posted in
the September 2003 quarter. This was mainly due to the gain on financial
instruments, described earlier, partly offset by interest paid on short term
borrowings, which resulted in a cost of R15 million in the current quarter
compared to an income last quarter of R21 million (US$3 million).
Exceptional items amounted to R31 million (US$6 million) and includes the
sale of the remaining shares in both Chesapeake Gold Corporation
(360,000) and Orezone Resources Inc. (2,186,500) together with 226,000
shares in Radius Exploration Ltd. (8 per cent of our holding), 848,000 (64
per cent of our holding) held in Committee Bay Resources Ltd. and
245,000 Harmony Shares (20 per cent of our holding). The exceptional gain in
the September quarter related to the sale of mineral rights and
associated assets at Driefontein and the sale of investments, which
amounted to R205 million (US$28 million).
TAXATION
Taxation at R84 million (US$12 million) compared to R37 million (US$5
million) for the previous quarter. This is due to higher gains on the financial
instruments and the deferred tax release last quarter as a result of the
Driefontein sale of mineral rights and associated assets of R53 million. The
South African operations are currently not in tax paying positions due to
reduced profits and high capital expenditure.
EARNINGS
As a result of the above net earnings, after accounting for minority
interests, were R277 million (US$42 million) or 57 SA cents per share
(US$0.09 per share), compared to R421 million (US$57 million) or 89 SA
cents per share (US$0.12 per share) in the previous quarter.
Headline earnings i.e. net earnings less the net after tax effect of asset
sales and the sale of investments, amounted to R249 million (US$36
million) compared to R164 million (US$22 million) last quarter. The main
reason for this increase is the higher gains on foreign debt and cash
together with the higher gains on financial instruments. Headline earnings
per share increased from 35 SA cents (US$0.05) to 51 SA cents (US$0.07)
over the same period.
Earnings, excluding exceptional items as well as the net gains on financial
instruments and foreign debt net of cash after taxation, amounted to R110
million (US$17 million) or 23 SA cents per share (US$0.03 per share) as
compared to R136 million (US$18 million) or 29 SA cents per share
(US$0.04 per share) achieved last quarter.
CASH FLOW
Operating cash flow for the quarter was R677 million (US$96 million),
compared to operating cash flow in the September quarter of R32 million
(US$4 million). The increase is mainly due to the positive change in
working capital of R297 million (US$39 million), due to a decrease in gold
debtors, and a decrease in tax payments of R253 million (US$32 million),
both of these due to timing.
Capital expenditure was R662 million (US$97 million) as compared to R553
million (US$74 million) in the September 2003 quarter. The increase is
mainly due to the Tarkwa mill project, which accounted for an increase of
R80 million (US$12 million). R252 million (US$39 million) was expended at
the South African operations. A significant portion of this expenditure was
directed at the major projects with R54 million at the 1E and 5E shafts at
Driefontein, R42 million at Kloof 4 shaft and R46 million at Beatrix 3 shaft.
Major projects are still forecast to be in line with approved votes. The
Australian operations incurred capital expenditure of R143 million (A$27
million), the majority on development of existing projects and exploration to
increase the ore reserve base at those operations. At the Ghanaian
operations, capital expenditure amounted to R194 million (US$29 million),
the majority at Tarkwa on the mill project.
Net cash inflow for the quarter was R1,437 million (US$198 million) after
taking account of the above as well as external loan repayments of R103
million (US$15 million) and the proceeds from an offshore private
placement of 17.25 million shares finalised during the quarter, which
amounted to US$217 million (R1,489 million). The cash balance at the end
of the December 2003 quarter was R1,104 million (US$161 million) as
compared to a deficit of R279 million (US$39 million) at the end of the
September 2003 quarter. Debt at the end of December was R101 million
(US$15 million) as compared to R211 million (US$29 million) at the end of
September 2003. The majority of these loans have since been repaid.
Quarter ended 31 December 2003
compared to quarter ended
31 December 2002
Attributable gold production decreased to 1,045,000 ounces in the
December 2003 quarter compared to 1,091,000 ounces in the December
2002 quarter. The decrease in production was due to the sale of St Helena
effective 30 October 2002 and the lower grades encountered at the South
African operations. This was partly offset by the excellent results achieved
at the international operations, where attributable production year on year
is up 15 per cent from 300,000 ounces to 346,000 ounces.
Revenue decreased 19 per cent in rand terms (increased 16 per cent in US
dollar terms) from R3,607 million (US$370 million) to R2,923 million
(US$431 million). This was due to a reduction in the rand gold price
achieved from R100,969 per kilogram (US$321 per ounce) in the
December 2002 quarter to R84,842 per kilogram (US$390 per ounce) in
the December 2003 quarter and the lower production. Operating costs
were virtually unchanged in rand terms. Operating cost increases at the
South African operations of R117 million (US$88 million) were offset by the
impact of converting costs at the international operations into South African
rand at a stronger R/US dollar exchange rate than the corresponding
quarter in the previous year. The average exchange rate strengthened
from R9.77 to the US dollar in the December 2002 quarter to R6.76 in the
current quarter. In US dollars the increase in cost of US$107 million was
due to the 30 per cent stronger rand.
Operating profit at R545 million (US$80 million) for the December 2003
quarter compares to R1,320 million (US$136 million) for the December
2002 quarter. After including the sale of St Helena in last December"s
results and the lower interest received due to interest paid this quarter on
short term borrowings, profit before tax at R370 million is one third of that
achieved in the December 2002 quarter.
Earnings decreased from R817 million (US$83 million) in the December
2002 quarter to R277 million (US$42 million) in the current quarter.
Six months ended 31 December 2003
compared to six months ended
31 December 2002
Attributable gold production decreased 6 per cent from 2,221,000 ounces
to 2,083,000 as a result of lower grades at the South African operations
and the sale of St Helena. This was partly offset by the increased
production from the international operations.
Revenue decreased by 22 per cent in rand terms (increased 10 per cent in
US dollar terms) from R7,570 million (US$752 million) to R5,875 million
(US$828 million) due to the decrease in production and the decrease in the
gold price from R102,808 per kilogram (US$318 per ounce) to R85,511 per
kilogram (US$375 per ounce) for the six months ended 31 December 2003.
Operating costs decreased 1 per cent when compared to the prior year at
R4,697 million (US$662 million) mainly due to the translation of costs at the
international operations at a 29 per cent stronger rand, which strengthened
from R10.07 to R7.10 to the dollar over this period.
Operating profit at R1,114 million (US$157 million) compares to R2,897
million (US$288 million) achieved in the six months to December 2002.
After accounting for the gains on financial instruments of R156 million
(US$22 million) and foreign debt net of cash of R61 million (US$9 million),
profit before tax amounted to R656 million (US$92 million) compared to
R2,139 million (US$213 million) for the same period last year.
Net earnings reduced from R1,359 million (US$135 million) in the six
months to December 2002 to R699 million (US$98 million) for the current
six months.
Detailed and Operational Revie w
Group overview
Attributable gold production for the December 2003 quarter improved to
1,045,000 ounces when compared to the September 2003 quarter.
Approximately one third of this production is attributable to the
international operations. As expected last quarter, production from the
Australian operations increased 10 per cent to 190,000 ounces this quarter.
This was as a result of an increase in tons throughput at St Ives and
improved grades and mining mix at Agnew. The increase at St Ives is largely
due to increased volumes from the low grade toll milling campaign aimed at
boosting cash flows. Operating profit from the Australian operations
increased 38 per cent to R165 million (US$34 million) for the quarter. The
Ghanaian operations showed an increase in gold production of 1 per cent
to 219,300 ounces due to an increase in tons treated at Damang. Ghana
contributed operating profit of R243 million (US$36 million), a 4 per cent
increase on the previous quarter"s operating profit. At the South African
operations production was 2 per cent lower at 698,000 ounces. An
increase of 1 per cent in production at both Beatrix and Kloof was offset by
a 6 per cent decrease at Driefontein due to recent fires in the high grade
areas.
Operating profit at the South African operations decreased from R216
million (US$29 million) to R137 million (US$21 million) mainly as a
consequence of the lower production and lower gold price. The
international operations contributed R262 million (US$38 million) of the
total net operating profit compared to R217 million (US$29 million) last
quarter.
Earnings in Australia amounted to R136 million (US$20 million), up from
R55 million (US$7 million) in the previous quarter. Excluding the gains on
financial instruments and foreign debt net of cash this quarter"s earnings
amounted to R43 million (US$6 million) compared to R9 million (US$1
million) last quarter.
Group ore milled increased from 11.50 million tons to 11.64 million tons
due to an increase in surface tons mainly at St Ives, due to the toll milling
campaign, and Damang. The overall yield remained unchanged at 3.0
grams per ton in line with the September 2003 quarter. Total cash costs in
rand terms decreased to R66,991 per kilogram from R67,566 per kilogram
achieved last quarter as a result of the increased production and stronger
rand. In US dollar terms, total cash costs increased from US$282 per
ounce to US$308 per ounce mainly due to the stronger South African rand.
Operating cost per ton at R202 improved from R204 last quarter, the
increase in operating costs being offset by the increase in tons milled.
South African Operations
DRIEFONTEIN
December September
2003 2003
Gold produced - 000"ozs 272.3 289.0
Total cash costs - R/kg 73,126 67,835
- US$/oz 336 284
Production at Driefontein decreased 6 per cent to 272,300 ounces. This
was due to a decrease in underground tonnage and yield when compared
to the previous quarter. These decreases were due to fires, which affected
output at 4W, 5W, 6W, 7W and 2E shafts. The fires necessitated additional
costs to open up new mining areas and the replacement of underground
ore with low grade surface material. Underground tonnage therefore
decreased to 950,000 tons from 994,000 tons, while overall tonnage
decreased to 1,558,000 tons from the 1,603,000 tons achieved last quarter.
The increased proportion of surface to underground ore treated resulted in
the combined yield decreasing from 5.6 grams per ton last quarter to 5.4
grams per ton this quarter.
Total cash costs increased by 8 per cent in rand terms to R73,126 per
kilogram from R67,835 per kilogram last quarter, mainly due to the effect of
the fires. In US dollar terms total cash costs increased from US$284 per
ounce to US$336 per ounce quarter on quarter as a result of the stronger
rand, allied with the lower production. Operating profit thus declined from
R133 million (US$18 million) in the September quarter to R68 million
(US$11 million) in the current quarter. Capital expenditure was virtually
unchanged at R82 million (US$13 million) for the quarter compared to R88
million (US$12 million) in the previous quarter, but will be lower over the
remainder of the year as funding requirements for the major projects i.e. 5E
and 1 Tertiary shaft reduce and with the mill upgrades being completed.
Despite some teething problems on commissioning, the Driefontein 1 plant
mill installation achieved design throughput towards the end of the
December quarter.
Following the fires production will continue to be affected into the March
quarter, but despite this and the Christmas break, a small increase in
production can be expected in the forthcoming quarter at similar cash cost
levels.
KLOOF
December September
2003 2003
Gold produced - 000"ozs 265.1 262.4
Total cash costs - R/kg 75,849 76,614
- US$/oz 349 320
Gold production at Kloof was 265,100 ounces, which was 1 per cent higher
than the previous quarter. This was due to higher underground grades,
which offset the lower underground mill tonnage as a result of the cessation
of operations at 9 shaft. Underground and surface tonnage was 921,000
tons and 363,000 tons respectively compared to 969,000 tons underground
and 278,000 surface tons last quarter. Surface yield reduced from 1.0
gram per ton to 0.8 grams per ton offset by an increase in surface tonnage.
The combined yield decreased marginally from 6.5 grams per ton to 6.4
grams per ton, due to the increase in surface tonnage. The 9 shaft
marginal mining and development project has now been put on care and
maintenance and the shaft has been restructured as a pumping facility
only.
Total cash costs decreased by 1 per cent in rand terms to R75,849 per
kilogram, but increased by 9 per cent in US dollar terms, from US$320 per
ounce to US$349 per ounce due to the strengthening of the rand compared
to the previous quarter. Revenue from the increase in gold output was
offset by the lower rand gold price received and a small increase in costs
was incurred, mainly due to the restructuring of 9 shaft. Operating profit
reduced by 9 per cent quarter on quarter in rand terms from R55 million
(US$7 million) to R50 million (US$7 million). Capital expenditure
decreased from R124 million (US$17 million) to R87 million (US$14 million)
this quarter. This level of expenditure is expected to be maintained in the
March quarter.
All areas being mined below or close to prevailing pay limits have been
closely scrutinised during the quarter. In response, crew moves have taken
place at all shafts to higher-grade panels, high-grade pillars or other gold
winning operations. The pillar extraction programme continues to gain
momentum as opportunities are better defined and opening up and
equipping schedules are profiled. The old gold winning programme will
continue to receive the necessary focus.
As a result of the Christmas and New Year closure and the traditionally
slow January start up, output in the March quarter is expected to be slightly
below that achieved in the December quarter.
BEATRIX
December September
2003 2003
Gold produced - 000"ozs 160.8 159.2
Total cash costs - R/kg 77,005 78,509
- US$/oz 354 328
Gold production at Beatrix increased marginally to 160,800 ounces from
the 159,200 ounces achieved in the previous quarter. This increase was
due to an improved underground yield to 4.7 grams per ton from 4.4 grams
per ton, which offset the decrease in underground tons. Underground ore
milled decreased to 1,000,000 tons this quarter from 1,054,000 last quarter
in line with our policy to reduce marginal mining announced last quarter,
while surface tons increased 19 per cent from 329,000 tons to 390,000
tons. This increase was partly due to 208,000 tons sent to the
neighbouring Joel mine for toll processing, an increase of 20,000 tons
when compared to the September quarter. Surface yields decreased from
0.8 grams per ton to 0.7 grams per ton.
Detailed and focused action plans have restored mining mixes at the
various shafts as reported in the previous quarter. The holing of a number
of raise lines, resolution of logistical and ventilation bottlenecks continue
tobe addressed in order to improve tonnage throughput. At 2 shaft, grades
have recovered to planned levels although volumes are still slightly below
plan. Beatrix 4 shaft incurred operating losses of R25 million during the
quarter, despite a 6 per cent improvement in gold values. Negotiations to
mine additional shifts including holidays and Sundays at the shafts are well
advanced. This should allow greater flexibility and an increase in volumes
in the next quarter. Exploration drilling on surface and underground has
confirmed extension of current facies at existing grades into adjacent areas
at 4 shaft.
Total cash costs decreased 2 per cent in rand terms to R77,005 per
kilogram and increased to US$354 per ounce from US$328 per ounce last
quarter. Operating profit declined from R28 million (US$4 million) to R18
million (US$3 million) quarter on quarter due to the lower gold price.
Capital expenditure increased from R77 million (US$11 million) last quarter
to R83 million (US$13 million) this quarter, with the commissioning of the
Knelson concentrator at 1 plant.
Despite the Christmas/New Year break, production in the March 2004
quarter should not be materially different from the December 2003 quarter.
International Operations
Ghana
TARKWA
December 2003 September 2003
Gold produced - 000"ozs 141.8 147.7
Total cash costs - US$/oz 227 210
Gold production decreased to 141,800 ounces compared to 147,700
ounces in the September quarter. This decrease in gold production is due
to a 4 per cent decrease in the volume of ore treated, as yields remained
unchanged quarter on quarter. Gold in process release was similar to the
previous quarter. Mining and processing volumes declined slightly due to
rain interruptions and unscheduled down time due to liner replacements at
the north crusher.
For the December quarter operating costs increased marginally to US$30
million. Unit costs increased from US$6.95 per ton treated to US$7.76 per
ton mainly attributable to an increase in the stripping ratio, an 8 per cent
increase in diesel costs, charges associated with mobilising additional haul
trucks to the site and the cost of the maintenance referred to earlier. The
effect of the additional trucks is expected to be seen in the March quarter,
with a planned increase in mining volumes. This increase in operating
expenditure coupled with the slightly lower gold production led to an 8 per
cent increase in total cash costs to US$227 per ounce. Tarkwa contributed
US$23 million (R156 million) to operating profit, an increase of 4 per cent
quarter on quarter.
The Tarkwa plant construction and owner mining projects are well
underway and on schedule. This is the primary reason for the significant
increase in capital expenditure this quarter to US$28 million (R189 million)
from US$11 million (R81 million) in the September quarter.
In the March quarter gold production is expected to be relatively stable
subject to gold in process movements, which remain difficult to predict.
Total cash costs are expected to remain close to current levels, as the
effect of a planned increase in stripping ratio from 2.2 in the quarter to
2.8 in the coming period will offset the effect of the one off charges
referred to earlier. In the longer term costs are expected to return closer
to historic levels of around US$210 per ounce.
DAMANG
December September
2003 2003
Gold produced - 000"ozs 77.5 70.1
Total cash costs - US$/oz 236 232
At Damang, production increased 10 per cent to 77,500 ounces due to an
increase in mill throughput, from 1,186,000 tons to 1,358,000 tons. The
increase in milled volume against the previous quarter is due to the
extended mill shut down, which occurred in July and ongoing optimisation
of the mill set up and feedblend. Both gold production and mill throughput
represent record levels for this mine. Yield was maintained at 1.8 grams
per ton.
Total cash costs increased from US$232 per ounce to US$236 per ounce
quarter on quarter. The increase in unit cash costs occurred despite a
decrease in unit operating costs from US$13.5 per ton to US$12.2 per ton
treated. The increase in cash costs was due to the inclusion of a US$1.2
million gold in process charge this quarter, reflecting the ongoing
movement in high value ores through the stockpiles compared to the
inclusion of a US$0.1 million gold in process credit in the September
quarter. The increase in stockpile utilisation reflects the decline in
availability of higher grade ores in the Damang pit complex due to the
maturity of that pit and the effect of heavy rain on mining during the
quarter. The net result was an increase in operating profit of 37 per cent
to US$13 million (R87 million).
Exploration to increase the current ore reserve continues and US$1 million
(R6 million) was included in costs during the quarter. Capital expenditure
once again was negligible.
Production should be marginally lower in the March 2004 quarter with
slightly lower tons and yields. Total cash costs should remain at current
levels.
Australia
ST IVES
December 2003 September 2003
Gold produced - 000"ozs 140.1 127.0
Total cash costs - A$/oz 395 412
- US$/oz 280 271
Gold production at St Ives was 140,100 ounces, an increase of 10 per cent
when compared to the September quarter"s production of 127,000 ounces.
This increase was due to a 9 per cent increase in tons treated, from
1,688,000 tons last quarter to 1,845,000 tons this quarter. This increase in
treatment volumes was mainly due to an increase in the toll treatment
program to 409,000 tons, producing approximately 30,000 ounces.
Ore production from underground increased by 5 per cent with an ongoing
build up of production from the Argo and Leviathan underground
operations, offsetting a marginal decline in performance at Junction
underground, following continuation of operating difficulties there.
Operating costs at A$56 million (R273 million, US$40 million) were 11 per
cent above the previous quarter due to costs associated with toll treatment
and an increase in ore mined from underground and surface. Total cash
costs were A$395 per ounce (US$280 per ounce) for the December quarter
compared to A$412 per ounce (US$271 per ounce) in the September
quarter. The decrease in total cash costs largely reflects the inclusion of a
A$3 million credit to operating costs reflecting capital expenditure
previously charged to operating costs for build up of operations on the new
underground mines. St Ives contributed A$21 million (R104 million, US$15
million) to operating profit compared to A$16 million (R79 million, US$11
million) in the previous quarter. The gold price achieved of A$551 per
ounce was similar to the September quarter. Capital expenditure reduced
to A$21 million (R107 million, US$16 million) in the December quarter from
A$26 million (R126 million, US$18 million) in the September quarter due to
the near completion of the Mars pit establishment costs.
Gold production and total cash costs should remain close to current levels
in the coming quarter.
AGNEW
December 2003 September 2003
Gold produced - 000"ozs 50.1 45.9
Total cash costs - A$/oz 296 372
- US$/oz 210 245
Gold production at Agnew increased 9 per cent quarter on quarter to
50,100 ounces. This reflects a 16 per cent increase in head grade, offset
by an 8 per cent planned reduction in mill throughput. The higher head
grade is due to a 10 per cent increase in delivery of high grade ores from
the Kim and Deliverer operations, displacing low grade stockpiled ores.
With the increase in head grade, mill throughput has been reduced to
optimise gold recovery and increase the operating margin.
The mine reported a significant decrease in total cash costs in Australian
dollars from A$372 per ounce (US$245 per ounce) last quarter, to this
quarter"s A$296 per ounce (US$210 per ounce). This reduction in unit
costs reflects not only the effect of the higher gold production but also a
reduction in expenditure on development at the Deliverer mine.
The contribution to operating profit from Agnew was A$13 million (R61
million, US$9 million) compared to A$8 million (R41 million and US$6) last
quarter. Capital expenditure was little changed at A$7 million (R33 million,
US$5 million) as exploration and development of the underground
operations at Waroonga continued.
Agnew performed above expectations once again and it is unlikely that this
level of production and profitability can be maintained. Thus production
next quarter is forecast close to the average of the last two quarters.
Capital and development projects
ST IVES EXPANSION PROJECT
As previously announced, a decision was taken during the quarter to
proceed with this project, which involves the construction of a new 4.5mtpa
mill and CIP facility, along with associated infrastructure. This plant will
replace the existing 3.1mtpa mill. The project entails a total investment of
some A$125 million and is expected to be completed by the end of
December 2004.
By the end of the quarter the execution team had been mobilised, initial site
preparation was underway, and detailed engineering had commenced.
TARKWA EXPANSION PROJECT
New Mill Project
During the December 2003 quarter construction of the new 4.2mtpa mill at
Tarkwa advanced significantly. The majority of site earthworks were
completed, while erection activities had commenced, beginning with the
CIL tanks. Construction of the tailings storage facility has also
commenced.
The mill remains on track for commissioning in the quarter ended
December 2004. The project remains within the US$85 million budget
save for possible currency exposure on the Australian dollar and South
African rand, representing up to US$3 to 4 million of overruns.
Conversion to owner mining
Following the decision in the previous quarter to proceed with Caterpillar
haul trucks (and support fleet) and Liebherr excavators, orders were
finalised in this period for Sandvik-Tamrock rock drills along with various
other support equipment and systems. All orders were placed within
budget. The first of these new haul trucks are due to arrive in Ghana at the
end of January 2004.
Planning for the transition of staff from the current contractor to the
mine"s employ is advanced and this transition is expected to commence in the
fourth quarter of financial 2004. Design of the fleet workshops and fuel bay
were completed in the December 2003 quarter and construction is due to
commence in January.
ARCTIC PLATINUM PROJECT
Activity at APP has been focused on the two large tonnage open pittable
deposits at Suhanko, namely Kontijarvi and Ahmavaara. During the
December 2003 quarter the bulk of the work focused on detailed in-fill
exploration, particularly on a recently excavated exposure of the Kontijarvi
deposit, which has proven key in advancing the understanding of the
geology and grade distribution of these deposits.
A similar exercise will be undertaken on Ahmavaara in the March 2004
quarter, after which a trial mine will be undertaken, aimed at both verifying
grade and geological models but also producing a bulk feed for a pilot plant
run, planned to be undertaken near the end of the fourth quarter. This trial
mine, pilot scale concentrator campaign and the subsequent downstream
treatment testwork is the critical path to completion of the feasibility
study on this project. It is planned to reach an investment decision by the
end of this calendar year.
DAMANG EXPANSION PROJECT
During the December 2003 quarter drilling of both paleoplacer and
hydrothermal deposits continued. The highest priority remained developing
alternative sources of high grade hydrothermal ores, and drilling targeted
the Rex and Amoando deposits which had previously been drilled by
Ranger Minerals, the former owners of Damang. By quarter end drilling
had been completed and evaluation was underway.
Drilling of the Tomento East paleoplacer deposit was also completed. This
target represents the best conglomerate target identified to date at Damang
and while encouraging and subject to final interpretation and modelling, is
expected only to produce incremental low grade, soft ore feed to the
Damang mill. Apart from some follow up in the south extension of the
Bonsa forest area, drilling of the conglomerates is now complete at
Damang.
Exploration and Corporate Development
CERRO CORONA IN PERU
On 19 December 2003, it was announced that an agreement was reached
whereby 92 per cent of the voting shares of Sociedad Minera La Cima S.A.,
subject to certain conditions, would be acquired from various members of
the Gubbins family. Sociedad Minera La Cima, which owns the Cerro
Corona Project and other mineral properties in Cajamarca, Peru has been
acquired conditional upon approval of the Environmental Impact Study and
the issue of construction permits.
The feasibility study suggests that the project has the capacity during
phase 1 to produce 147,000 ounces of gold and 65 million pounds of
copper per year (280,000 ounces of gold-equivalent), with total operating
costs of $212 per ounce of gold equivalent or $0.48 per pound of copper
equivalent (using a gold price of $360/oz and a copper price of 80c/lb). A
second phase, which could potentially double production, is currently under
investigation.
The deposit, which lies within a well endowed trend just to the north of the
Yanacocha mine in the Cajamarca district of northern Peru, is well studied
and has robust economics.
The remainder of the belt and the district has seen relatively little modern
exploration and is thus quite prospective.
This transaction is in line with our strategy of diversifying our
geographical, technical and political risk by acquiring and developing
long-life, world class assets in all of the major gold provinces of the world.
This acquisition will give us our first operational exposure in South America,
a base from which we intend to grow in the region.
FURTHER CHINA VENTURES
Gold Fields has entered into a strategic partnership with Chinese company
Fujian Zijin Mining Industry (Zijin) to explore for and develop gold mines in
China. This complements the exploration joint venture with Sino Mining in
the Shandong province of China.
Zijin is one of China"s largest gold producers. The firm"s main asset is the
Fujian province-based Zijinshan Gold Mine, China"s biggest gold-producing
mine. The company has interests in a number of other gold and base
metal projects throughout China, ranging from grass-roots exploration to
operating stage.
Shares worth $7.73 million in Zijin have been purchased by Gold fields
through its wholly owned subsidiary Orogen Holdings. This is about 5.7 per
cent of the float of 27 per cent of the company in the initial public offering
of Zijin on the Hong Kong bourse. Now that the shares have been purchased,
a joint venture will be established. Initially, Gold Fields would hold 60 per
cent of the venture and Zijin 40 per cent of the joint venture. The purpose
of the joint venture would be to explore and develop gold properties in
China"s Fujian province.
On 16 January 2004 Sino Gold Fields Joint Venture ("SGF") entered into
an exploration alliance and project joint venture agreement in Shandong
Province, Peoples Republic of China.
The agreement is with the Shandong provincial Bureau of Geo-Mineral
Exploration and Development ("Shandong BGMR") for a cooperative joint
venture to explore the Hei-Shan gold exploration project. This is a
greenfields exploration prospect with alteration style lode deposits.
Previously tested to a shallow depth, the site has favourable structural
settings and is adjacent to similar style deposits that are producing gold at
depth beneath an unmineralised portion of over 200 metres. The
agreement also covers possible project evaluation and development and
an exclusive right to cooperate in three other exploration areas, preserved
for 12 months. The cooperative joint venture is held 70 per cent by SGF
and 30 per cent by Shandong BGMR, with SGF providing the first phase
exploration funding and Shandong BGMR the tenement.
SGF is the 50/50 joint venture between Sino Gold and Gold Fields to
identify and acquire exploration properties in Shandong Province, which is
China"s richest gold producing province with several two to three million
ounce gold deposits. This region is considered to be highly prospective
and is a focus for SGF"s activity.
OTHER PROJECTS
Lastly, Gold Fields announced a joint venture option with Bolivar Gold
Corporation to earn up to 60 per cent in the Monte Ollasteddu prospect in
southeast Sardinia. Bolivar had previously optioned a 70 per cent interest
in this project from Gold Mines of Sardinia.
During the quarter, exploration drilling was undertaken on the Arctic
Platinum project in Finland, the Bibiani project in Ghana, the Mansounia
project in Guinea, the Miyabi project in Tanzania and the Essakane project
in Burkina Faso.
Project interests were sold to joint venture partners at the Hereward joint
venture in Bulgaria, the Tambor joint venture in Guatemala and the Sanu
joint venture in Eritrea. Gold Fields also relinquished its interest in the
Capanema project in Brazil.
The company is responding to favourable market conditions for gold by
aggressively increasing its exploration program and continuing its search
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