| Thu 6 May 2004, 9:35 | | Financial Report Quater 31 March 2004 |
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Gold Fields Limited - Financial Report
Gold Fields Limited
Incorporated in the Republic of South Africa
Registration number 1968/004880/06
Share code: GFI
Issuer code: GOGOF
ISIN: ZAE000018123
NEWS RELEASE Q3 F2004 RESULTS
Quarter Ended 31 March 2004
-Unaudited-
STOCK DATA
Number of shares in issue
- at 31 March 2004 491,320,299
- average for the quarter 491,254,653
Free Float 100%
ADR Ratio 1:1
Bloomberg / Reuters GFISJ / GFLJ.J
JSE SECURITIES EXCHANGE SOUTH AFRICA- (GFI)
Range - Quarter ZAR77.41 - ZAR102.60
Average Volume - Quarter 1,338,000 shares / day
NYSE - (GFI)
Range - Quarter US$11.50 - US$14.91
Average Volume - Quarter 1,447,900 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
GOLD FIELDS DELIVERS STRONG PERFORMANCE
WITH 20 PER CENT JUMP IN OPERATING PROFIT
JOHANNESBURG. 6 May 2004 - Gold Fields Limited (NYSE & JSE: GFI) today
announced March 2004 quarter net earnings of R255 million (51 cents per share)
compared with net earnings of R277 million (57 cents per share) in the December
2003 quarter and R805 million (171 cents per share) for the March quarter of
2003. In US dollar terms the March 2004 quarter net earnings were US$38 million
(US$0.07 per share) compared with US$42 million (US$0.09 per share) in the
December 2003 quarter and US$93 million (US$0.20 per share) for the March
quarter of 2003. Attributable gold production for the March 2004 quarter was
1.033 million ounces compared with 1.045 million ounces in the December 2003
quarter.
March 2004 quarter highlights included:
* Operating profit up 20 per cent to R656 million (US$96 million);
* Recovery in operating margin from 19 per cent to 22 per cent, (South African
operations from 7 per cent to 14 per cent);
* Attributable gold production virtually unchanged at 1.033 million ounces,
despite extended Christmas break;
* Total cash costs were flat quarter on quarter at R67,528 per kilogram and
US$309 per ounce;
* International growth strategy progressing well with major growth projects in
Ghana, Australia, Peru and Finland on track;
* International operations are debt free; and
* Successful conclusion of the Mvelaphanda transaction leaves Gold Fields in a
strong financial position which will enable growth projects to be funded
internally.
Ian Cockerill, Chief Executive Officer of Gold Fields said:
"Despite the tough operating environment during the March 2004 quarter, Gold
Fields has produced satisfactory results. The ongoing repositioning of our
South African operations, to improve grades and reduce costs, has contributed
to significant margin expansion. I fully expect this trend to continue."
"These results reflect our focus on delivering value to shareholders. We
continue to implement our strategy to build a high quality, internationally
diverse, gold company that is optimally managed for sustainable earnings
growth."
"In addition, during the quarter, MMC Norilsk acquired a 20 per cent interest in
Gold Fields from Anglo American plc. After preliminary discussions with Norilsk
it has been agreed to explore the potential for co-operation with regards to our
respective gold assets."
Salient features
SA Rand
Nine months to
March March
2003 2004
kg Gold produced* 102,433 96,910
R/kg Total cash costs 61,263 67,360
000 Tons milled 32,063 34,952
R/kg Revenue 100,302 86,630
R/ton Operating costs 216 202
Rm Operating profit 4,023 1,770
Rm 2,164 953
Net earnings
SA c.p.s. 459 197
Rm 1,899 634
Headline earnings
SA c.p.s. 403 131
Net earnings excluding
Rm 1,785 485
gains and losses on
financial instruments and
SA c.p.s. 378 100
foreign debt net of cash
and exceptional items
Quarter
March Dec March
2003 2003 2004
kg Gold produced* 33,340 32,480 32,131
R/kg Total cash costs 60,709 66,991 67,528
000 Tons milled 10,792 11,640 11,815
R/kg Revenue 95,068 84,842 88,887
R/ton Operating costs 201 202 199
Rm Operating profit 1,126 545 656
Rm 805 277 255
Net earnings
SA c.p.s. 171 57 51
Rm 644 249 221
Headline earnings
SA c.p.s. 136 51 45
Net earnings excluding
Rm 476 111 238
gains and losses on
financial instruments and
SA c.p.s. 101 23 48
foreign debt net of cash
and exceptional items
US Dollars
Quarter
March Dec March
2004 2003 2003
Gold produced* oz (000) 1,033 1,045 1,072
Total cash costs $/oz 309 308 225
Tons milled 000 11,815 11,640 10,792
Revenue $/oz 407 390 353
Operating costs $/ton 29 30 24
Operating profit $m 96 80 135
$m 38 42 93
Net earnings
US c.p.s. 7 9 20
$m 33 36 75
Headline earnings
US c.p.s. 7 7 16
Net earnings excluding
$m 34 17 58
gains and losses on
financial instruments and
US c.p.s. 7 3 12
foreign debt net of cash
and exceptional items
Nine months to
March March
2004 2003
Gold produced* oz (000) 3,116 3,293
Total cash costs $/oz 299 200
Tons milled 000 34,952 32,063
Revenue $/oz 395 328
Operating costs $/ton 29 23
Operating profit $m 253 423
$m 136 228
Net earnings
US c.p.s. 28 48
$m 91 200
Headline earnings
US c.p.s. 19 42
Net earnings excluding
$m 69 188
gains and losses on
financial instruments and
US c.p.s. 14 40
foreign debt net of cash
and exceptional items
*Attributable - All companies wholly owned except for Ghana (71.1%).
Overview
As anticipated, largely due to the Christmas break at the South African
operations, the Group"s attributable gold production for the March quarter at
1.03 million ounces was 1 per cent below that of the December quarter.
Total cash costs in the March quarter were virtually unchanged at R67,528 per
kilogram despite lower production and the impact of translating Australia"s
costs at a stronger Australian dollar. Total cash costs in US$ terms at $309
per ounce also tracked the previous quarter, with the rand/dollar exchange rate
being stable at R6.79 compared with R6.76 in the previous quarter.
Net earnings excluding gains and losses on financial instruments and foreign
debt net of cash and exceptional items were slightly more than double the
previous quarter due to the 20 per cent increase in operating profit.
Net earnings were 8 per cent below the December 2003 quarter, at R255 million
(US$38 million). This was due to a reduction in gains from financial
instruments and an increase in finance costs associated with an unrealised
exchange loss on Euro"s held offshore. The aggregated effect of these two items
more than offset the 20 per cent increase in operating profit achieved for the
quarter due to the increased gold price and reduced costs.
Health and safety
During the quarter the lost day injury frequency rate at the operations
improved from 15.4 to 13.8, the serious injury frequency rate improved from 7.9
to 6.5 and the fatal injury frequency rate improved from 0.37 to 0.15. This is
an excellent achievement. Beatrix achieved a million fatality free shifts
during the quarter with Beatrix 4 shaft achieving one year without a fatality
on 23 January 2004.
This achievement is a first for a senior operations manager in the Group. In
addition, Damang mine in Ghana recorded one year without any lost day injuries,
also on 23 January.
Financial Review
Quarter ended 31 March 2004 compared
with quarter ended 31 December 2003
REVENUE
Revenue was 4 per cent higher than the previous quarter at R3,028 million
(US$444 million). It compared with R2,923 million (US$431 million) in the
December quarter. This was due to a higher rand gold price as a consequence of
a 4 per cent increase in the average US dollar gold price from US$390 per ounce
to US$407 per ounce in the March quarter. The average Rand/US dollar exchange
rate remained virtually unchanged at 6.79. The resultant rand gold price of
R88,887 per kilogram was 5 per cent higher than the R84,842 per kilogram
achieved last quarter. The higher gold price was partly offset by the lower
gold sales of 34,069 kilograms (1,095,300 ounces) compared with 34,451
kilograms (1,107,600 ounces) last quarter.
OPERATING COSTS
Operating costs at R2,351 million (US$345 million) for the quarter were
marginally lower than the previous quarter"s costs of R2,355 million (US$347
million). At the South African operations, costs decreased 3 per cent compared
with the previous quarter. This was in line with the slightly lower production
levels at Kloof and Beatrix as a result of the Christmas break. At Driefontein,
costs decreased 2 per cent despite the 6 per cent increase in production. Last
quarter"s costs included opening up of additional areas as a result of the
underground fires. The lower costs at the South African operations also reflect
the positive impact of cost reduction strategies. However, these lower costs
were offset by the increase in costs at the international operations. This
increase was mainly due to translating costs at the Australian operations at a
stronger Australian dollar. Ghana"s costs increased this quarter in line with
the higher volumes mined, associated with accelerated stripping to provide
greater flexibility.
OPERATING PROFIT MARGIN
The net effect of the higher revenue and lower costs, was an increase in
operating profit from R545 million (US$80 million) in the December quarter to
R656 million (US$96 million) this quarter.
The operating margin for the Group increased to 22 per cent for the current
quarter from 19 per cent in the previous quarter. This was due to an increase in
margins at the South African operations from 7 per cent in the previous quarter
to 14 per cent in the March quarter. The increase at the South African
operations resulted from the higher gold price and lower costs despite the fact
that production was only 90 kilograms lower than the previous quarter. The
margin at the international operations decreased from 38 per cent last quarter
to
34 per cent this quarter. The reduction was due to lower production at St Ives
associated with a mill shutdown and less material toll treated.
AMORTISATION
Amortisation was slightly lower than the previous quarter at R298 million
(US$44 million), in line with the decreased production.
ACCOUNTING FOR THE MVELA TRANSACTION
The net proceeds of R4,107 million (R4,139 million less R32 million of costs)
from the Mvela loan was accounted for as two components. The first is the debt
component of the Mvela loan of R1,653 million, which is the present value of
the future interest payments determined at a fixed half yearly rate of 10.56
per cent.
The debt component is shown under long-term and current portion of long-term
loans in the balance sheet. The balance of R2,454 million was accounted for as
the equity component of the Mvela loan. The equity component is shown under
shareholders" equity in the balance sheet.
Due to the difference between the accounting and taxation treatment of the
Mvela loan a deferred taxation asset of R677 million was recognised with the
corresponding credit included with the equity component of the Mvela loan. The
deferred taxation asset will be charged to earnings as the loan is repaid.
FINANCIAL INSTRUMENTS AND DEBT
Exchange losses on foreign debt and cash amounted to R34 million (US$5 million)
compared with a gain of R60 million (US$8 million) last quarter. Included in
this loss is an amount of R31 million (US$4 million) due to an unrealised
exchange loss on Euro funds held offshore. The Euro"s resulted from an offshore
share placement conducted late last year, which realised US$217 million net of
costs. These funds were redenominated into Euro"s. The loss has resulted from
the weakening of the Euro against the US dollar from 1.25 to 1.23 over the
quarter. In the December quarter the gain on these Euro"s amounted to R65
million (US$9 million) as the Euro strengthened against the US dollar from
1.20, being the value at the date of the original conversion from US dollar
into Euro"s, to the December closing rate of 1.25 to the US dollar. The balance
of the loss on foreign debt and cash was a small exchange loss on the repayment
of the Australian debt outstanding at the end of December of US$11 million.
This loss amounted to R3 million (US$1 million), which was similar to last
quarter.
The gain on the financial instruments for the quarter amounted to R44 million
(US$7 million) compared with R120 million (US$17 million) earned last quarter.
Included in this quarter are gains on the Australian financial instruments of
R98 million (US$15 million), offset by losses on the Tarkwa forward purchases
of R25 million and a marked to market loss of R29 million (US$4 million) as a
result of an interest rate swap executed in relation to the Mvela loan, all
explained in more detail below.
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. Gains
on these financial instruments amounted to R98 million (US$15 million) in the
current quarter as detailed below, compared with R143 million (US$20 million)
in the previous quarter. The gain in the previous quarter was a result of the
Australian dollar strengthening against the US dollar, from 68.14 cents at the
end of the September 2003 quarter to 73.41 cents at the end of the December
quarter 2003. The closing rate at the end of the March quarter was 75.15 US
cents to the Australian dollar.
On 7 January 2004, Gold Fields Australia closed out the Australian dollar/US
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 to the same maturity dates of the original
translation. 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$116 million and the underlying cash receipts were
deferred to match the maturity dates of the original transactions. The present
value of this gross profit amounted to US$112 million. An amount of US$103
million had already been accounted for in the marked to market valuation up
until the end of December 2003. During the quarter the scheduled closure of
US$12.5 million of the overall position, thus reducing it to US$275 million,
resulted in a profit of US$5 million and this, together with the
crystallisation of the profit above, resulted in a net gain of US$14 million
(R98 million).
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 remaining period of the original
structure.
The Australian dollar call options resulted in a premium of US$8.3 million
based on a strike price of 0.7670 US$/AU$. The payments were also deferred to
match the maturity dates of the original structure. The options are valued on a
marked to market basis.
The gain on the above financial instruments was partially offset by an
unrealised loss of R25 million (US$4 million) on the 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.
In the December quarter the unrealised loss amounted to R23 million (US$3
million). The weighted average forward rate in respect of the forward cover is
R8.43 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
R89 million (US$14 million negative).
The balance of negative R29 million (US$4 million) is the marked to market loss
as a result of an interest rate swap in respect of the Mvela loan. The interest
rate exposure on the Mvela loan was converted from a fixed rate of 10.56 per
cent nominal annual compound semi-annually to a floating rate, being the three
month Jibar rate, by concluding an interest rate swap over the life of the
loan.
Full details of this and other financial instruments are given on page 11 of
this report.
EXPLORATION AND OTHER
Exploration expenditure increased, from R35 million (US$5 million) in the
December quarter to R44 million (US$7 million) in the March quarter, largely as
a result of planned increased activity. The increase in other income of R22
million (US$3 million) relates mainly to shares received in offshore
exploration companies in exchange for joint venture exploration interests, the
market value of which has been included in income.
EXCEPTIONAL ITEMS
Profit before taxation and exceptional items decreased 7 per cent to R345
million (US$51 million) compared with R370 million (US$54 million) posted in
the December 2003 quarter. This was mainly due to the net loss on foreign debt
and cash as well as reduced gains on financial instruments, described earlier,
which more than offset the increase in operating profit. Exceptional items
amounted to R21 million (US$3 million) and includes the sale of the remaining
shares of 1,003,000 in Harmony Gold Mining Company Limited and the remaining
485,000 shares held in Committee Bay Resources Limited, resulting in a profit
of R47 million (US$7 million). This was partly offset by the write off of
mineral rights amounting to R25 million (US$4 million). This write off arises
from the introduction of the Mineral and Petroleum Resources and Development
Act, 2002 (Act No. 28 of 2002), which was declared effective on 1 May 2004.
TAXATION
Taxation at R64 million (US$9 million) compared with R84 million (US$12
million) for the previous quarter. This was mainly due to reduced gains on the
financial instruments.
EARNINGS
As a result of the above, net earnings, after accounting for minority
interests, were R255 million (US$38 million) or 51 SA cents per share (US$0.07
per share), compared with R277 million (US$42 million) or 57 SA cents per share
(US$0.09 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 R221 million (US$32 million) or
45 SA cents per share (US$0.07) compared with R249 million (US$36 million) or
51 SA cents per share (US$0.07) last quarter. The main reason for this decrease
was the exchange loss on foreign debt and cash together with the lower gains on
financial instruments.
Earnings, excluding exceptional items as well as the net gains on financial
instruments and foreign debt net of cash after taxation, amounted to R238
million (US$34 million) or 48 SA cents per share (US$0.07 per share) as
compared with R110 million (US$17 million) or 23 SA cents per share (US$0.03
per share) achieved last quarter. This improvement reflects the 20 per cent
increase in operating profit.
CASH FLOW
Operating cash flow for the quarter was R528 million (US$77 million), compared
with operating cash flow in the December quarter of R677 million (US$96
million). The decrease is mainly due to an increase in taxation paid of R68
million (US$9 million).
An interim dividend of R197 million (US$29 million) was paid during the quarter.
No dividend was paid in the previous quarter.
Capital expenditure was R749 million (US$109 million) as compared with R662
million (US$97 million) in the December 2003 quarter. The increase is mainly
due to increased expenditure on growth projects in Ghana and Australia. R153
million (US$28 million) was expended at the South African operations. This is a
decrease of R99 million (US$11 million) when compared with the previous quarter
due to the deferral/cut back of non-essential capital expenditure without
negatively impacting on key capital projects. The Australian operations
incurred capital expenditure of R269 million (A$57 million), the majority on
development of existing projects and exploration to increase the ore reserve
base at those operations. The mill project at St Ives commenced this quarter
and accounted for R91 million (A$19 million) of this expenditure. At the
Ghanaian operations, capital expenditure amounted to R282 million (US$46
million), the majority at Tarkwa on the mill and owner mining projects, which
amounted to R263 million (US$43 million) as compared with R153 million (US$23
million) the previous quarter. Expenditure to date on these projects amounts to
R475 million (US$73 million), leaving a balance of US$86 million to completion.
Major projects are still forecast to be in line with approved votes except for
a possible small over expenditure on the mill project at Tarkwa, which will
depend on currency moves over the next few months. During the quarter the
proceeds from the sale of Driefontein"s 1C11 block amounting to R315 million
(US$45 million) was received.
Cash flows from financing activities include the proceeds from the Mvela
transaction of R3.8 billion (US$543 million). This receipt is net of the Mvela
shares subscribed for of R100 million (US$15 million) and the redeemable
preference shares of R200 million (US$29 million) and transaction costs of R32
million (US$ 5 million). Outstanding foreign debt of US$14 million (R100
million) was repaid during the quarter and the offshore operations are now
debt free.
Net cash inflow for the quarter including the above was R3,684 million (US$527
million). The cash balance at the end of the March 2004 quarter was R4,701
million (US$721 million) as compared with R1,104 million (US$161 million) at
the end of the December 2003 quarter.
Quarter ended 3 1 March 2004
compared with quarter ended
31 March 20 03
Attributable gold production decreased by 4 per cent to 1,033,000 ounces in the
March 2004 quarter compared with 1,072,000 ounces in the March 2003 quarter.
The decrease in production was due to lower underground and surface yields 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 10 per cent from 308,000 ounces to 338,000 ounces.
Revenue decreased 10 per cent in rand terms (increased 12 per cent in US dollar
terms) from R3,352 million (US$397 million) to R3,028 million (US$444 million).
This was due to a reduction in the rand gold price achieved from R95,068 per
kilogram (US$353 per ounce) in the March 2003 quarter to R88,887 per kilogram
(US$407 per ounce) in the March 2004 quarter and the lower production. Group
operating costs in rand terms increased by 8 per cent or R179 million (US$89
million). At the South African operations operating costs increased by 6 per
cent or R89 million (US$60 million) slightly lower than the wage increases. The
increase at the international operations amounted to 15 per cent, from R617
million (US$74 million) to R707 million (US$104 million).
This increase results from the increased levels of production in Australia and
the increase in waste mined to improve mining flexibility at Tarkwa. Added to
this is the effect of translating costs at the Australian operations at a 5 per
cent weaker Rand, which weakened from an average of 4.95 to 5.19 Rand to the
Australian dollar in comparative periods. This was offset partially by
translating costs at Ghana into South African rand at a 19 per cent stronger
Rand/US dollar exchange rate than the corresponding quarter in the previous
year. The average exchange rate strengthened from R8.38 to the US dollar in the
March 2003 quarter to R6.79 in the current quarter.
Operating profit at R656 million (US$96 million) for the March 2004 quarter
compares to R1,126 million (US$135 million) for the March 2003 quarter as a
result of the above.
Profit before tax amounted to R365 million (US$54 million) compared with R1,214
million (US$141 million) in the March 2003 quarter. The decrease in the profit
was due to the lower operating profit described above as well as the following
items. The gain on financial instruments reduced from R185 million (US$19
million) to R44 million (US$7 million); net interest and investment income was
negative R4 million (US$1 million) in the current quarter compared with a
positive R41 million (US$5 million) in the March 2003 quarter; exchange gains
and losses reduced from a R55 million (US$6 million) gain to a loss of R34
million (US$5 million) in the current quarter and exceptional items reduced
from R177 million (US$19 million) to R21 million (US$3 million) this quarter,
due to lower profit on the sale of shares, offset partially by the lower
amortisation of R298 million (US$44 million) in line with the lower production.
Earnings decreased from R805 million (US$93 million) in the March 2003 quarter
to R255 million (US$38 million) in the March 2004 quarter.
Nine months ended 31 March 2004
compared with nine months ended
31 March 2003
Attributable gold production decreased 5 per cent from 3,293,000 ounces to
3,116,000 as a result of lower grades at the South African operations and the
sale of St Helena. St Helena accounted for 43,700 of these ounces. Gold
output from Kloof and Driefontein decreased by 100,000 ounces each. This was
partly offset by the increased production of 9 per cent from the international
operations.
Revenue decreased by 18 per cent in rand terms (increased 11 per cent in US
dollar terms) from R10,922 million (US$1,149 million) to R8,904 million
(US$1,272 million) due to the decrease in production and the decrease in the
gold price from R100,302 per kilogram (US$328 per ounce) to R86,630 per
kilogram (US$385 per ounce) for the nine months ended 31 March 2004.
Operating costs increased 2 per cent compared with the prior year period at
R7,047 million (US$1,007 million). However, due to the lower production, the
unit cost increased 11 per cent to R67,528 per kilogram as compared with
R60,709 per kilogram in the prior period. The increase at the South African
operations of 9 per cent was offset by the lower costs at the International
operations, as a result of translating the Ghanaian operations at a 26 per cent
stronger rand, which strengthened from an average of R9.51 to R7.00 to the US
dollar over this period. The stronger rand when compared with the Australian
dollar had a similar effect when translating the Australian operations, though
smaller at 7 per cent, strengthening from an average of 5.36 to 4.97 rand to
the Australian dollar.
Operating profit at R1,770 million (US$253 million) compared with R4,023
million (US$423 million) achieved in the nine months to March 2003. Profit
before tax amounted to R1,257 million (US$180 million) compared with R3,476
million (US$366 million) for the same period last year due to the lower
operating profit described above and the effect of the items listed below.
Gains on financial instruments of R200 million (US$29 million) compared with
R150 million (US$16 million) for the nine months to March 2003. Finance income
of R28 million (US$4 million) compared with R145 million (US$15 million) in the
prior period.
The exceptional gains were R300 million (US$32 million) compared with the
current year to date income of R257 million (US$37 million).
Net earnings reduced from R2,164 million (US$228 million) in the nine months to
March 2003 to R953 million (US$136 million) for the current nine months to
March 2004.
Detailed and Operational Review
Group overview
Attributable gold production for the March 2004 quarter decreased marginally to
1,033,000 ounces when compared with the December 2003 quarter.
Production from the Australian operations decreased 3 per cent to 184,600
ounces this quarter due to lower volumes at St Ives. Operating profit from the
Australian operations decreased 28 per cent to R119 million (A$23 million,
US$18 million) for the quarter, primarily as a result of the lower production
and increased unit costs at St Ives. The Australian dollar strengthened this
quarter form an average of 4.80 to 5.19 to the rand in the current quarter. The
Ghanaian operations showed a 2 per cent decrease in attributable gold
production to 153,200 ounces partly due to accelerated waste mining in order to
increase mining flexibility at Tarkwa. Ghana contributed operating profit of
R263 million (US$39 million), an 8 per cent increase on the previous quarter"s
operating profit.
The improvement in operating profit is due to the higher gold price achieved.
The international operations contributed, R382 million (US$56 million) of the
total operating profit of R656 million (US$96 million) or 58 per cent compared
with R408 million (US$60 million) last quarter of the total operating profit of
R545 million (US$80 million) or 75 per cent.
At the South African operations, production was virtually unchanged at 695,200
ounces. The decrease of approximately 5 per cent in gold production at both
Beatrix and Kloof related to the Christmas break, which was offset by a 6 per
cent increase in output at Driefontein due to the diminished effect of the
fires in the high grade areas this quarter and gold from plant clean up.
Operating profit at the South African operations increased from R137 million
(US$21 million) to R274 million (US$40 million) mainly as a consequence of the
higher gold price and significantly reduced costs.
Group ore milled increased from 11.64 million tons to 11.82 million tons due to
an increase in surface tons mainly at Tarkwa and Driefontein. The overall yield
of 2.9 grams per ton was in line with the December quarter. Total cash costs in
rand terms increased to R67,528 per kilogram from R66,991 per kilogram achieved
last quarter mainly as a result of the lower production and increased costs at
St Ives. In US dollar terms, total cash costs were virtually unchanged at
US$309 per ounce compared with US$308 per ounce. Operating cost per ton at R199
improved from R202 last quarter, the increase in tons milled being offset by
reduced operating costs.
South African Operations
DRIEFONTEIN
March December
2004 2003
Gold produced - 000"ozs 289.6 272.3
Total cash costs - R/kg 67,607 73,126
- US$/oz 310 336
Production at Driefontein increased 6 per cent to 289,600 ounces as a result of
an increased underground yield compared with the previous quarter and clean- up
from the old no. 1 and no. 2 mill processing plants. This is now almost
complete. Underground tonnage decreased mainly due to the Christmas break and
the closure of 5W shaft. In addition, gold production at the West shafts was
optimised by stopping all the low-grade mining, which was not making a
contribution. This resulted in lower underground tonnage at an increased grade
of 8.6 grams per ton compared to 7.5 grams per ton last quarter. Underground
tonnage decreased by 12 per cent to 838,000 tons from 950,000 tons, while
overall tonnage increased by 6 per cent from 1,558,000 tons in the December
quarter to 1,655,000 tons achieved in the current quarter. Although additional
surface material was treated during the Christmas break, the combined yield
remained the same as the previous quarter at 5.4 grams per ton, as a result of
the increase in underground yield.
Operating costs decreased from R648 million to R638 million for the quarter as
last quarter included additional opening up costs due to the fires.
Total cash costs decreased by 8 per cent in rand terms to R67,607 per kilogram
from R73,126 per kilogram last quarter as a result of the increased production.
In US dollar terms the total cash cost decreased by 8 per cent from US$336 per
ounce to US$310 per ounce quarter on quarter. Operating profit more than
doubled, from R68 million (US$11 million) in the December quarter to R158
million (US$23 million) in the current quarter.
Capital expenditure decreased to R29 million (US$6 million) for the quarter
partially due to timing but also because of a deliberate decision to defer
projects where possible that would not affect production, given the current
margin squeeze. This compared with R82 million (US$13 million) in the previous
quarter.
Production volumes for the June quarter will be affected by the Easter break,
an additional public holiday declared in order to vote in the recent elections
and lower gold volumes from surface gold clean-up at no.1 and no. 2 plants in
line with the operational plan. Improved volumes from underground should offset
this. The expected gold output, should, however remain fairly constant when
compared with the March quarter"s gold production.
KLOOF
March December
2004 2003
Gold produced - 000"ozs 250.9 265.1
Total cash costs - R/kg 75,920 75,849
- US$/oz 348 349
Gold production at Kloof decreased 5 per cent to 250,900 ounces in the March
quarter. This was due to the reef tons milled from underground being affected
negatively by the extended Christmas break and the slower than expected
production build-up after this break. Underground tonnage decreased to
744,000 tons this quarter from 921,000 tons last quarter, while surface tons
increased 33 per cent from 363,000 tons to 483,000 tons, largely in response to
the lower underground tons milled.
The initiative during the last two quarters of mothballing the marginal 9 shaft,
accessing VCR pillars and relocating crews from low grade areas to higher
grade panels has resulted in the underground yield increasing from 8.6 grams
per ton last quarter to 10.0 grams per ton this quarter. The combined yield
remained at 6.4 grams per ton due to increased treatment from surface sources
during the Christmas break.
Operating costs for the quarter at R617 million (US$91 million) were 5 per cent
lower than the previous quarter"s costs of R652 million (US$96 million) in line
with the lower production and the results of good cost control initiatives.
Total cash costs at R75,920 per kilogram were almost unchanged from the
previous quarter of R75,849 per kilogram. In US dollar terms, total cash costs
decreased slightly from US$349 per ounce to US$348 per ounce quarter on
quarter.
Operating profit increased 50 per cent to R75 million (US$11 million) compared
with R50 million (US$7 million) the previous quarter. Capital expenditure
decreased from R87 million (US$14 million) to R57 million (US$10 million) this
quarter. This level of expenditure is expected to be maintained in the June
quarter.
The emphasis remains on repositioning the mines to higher grade areas in order
to combat the strength of the rand"s impact on margins. Pillar mining
opportunities and old gold initiatives are receiving attention, while the focus
on increased volumes from underground remains. Gold production for the June
quarter should show an improvement despite the number of public holidays in the
June quarter.
BEATRIX
March December
2004 2003
Gold produced - 000"ozs 154.7 160.8
Total cash costs - R/kg 78,143 77,005
- US$/oz 358 354
Gold production at Beatrix decreased 4 per cent to 154,700 ounces from the
160,800 ounces achieved in the previous quarter. This decrease was mainly
due to lower underground yields. Underground ore milled remained constant at
1,003,000 tons this quarter compared with 1,000,000 tons last quarter, while
surface tons increased 15 per cent from 390,000 tons to 450,000 tons. Toll
processing at Joel accounted for 304,000 of these tons, an increase of 96,000
tons when compared with the December quarter. Lower underground and
surface yields, together with increased surface tonnage resulted in a decrease
in the combined yield from 3.6 grams per ton to 3.3 grams per ton in the March
quarter.
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 to be
addressed in order to improve tonnage throughput. At 2 shaft, grades have
recovered to planned levels although volumes are still slightly below plan. At
3 shaft exploration drilling from surface and underground has confirmed the
extension of the current facies to the north. Beatrix 4 shaft incurred
operating losses of R18 million (US$3 million) during the quarter. Discussions
with the unions to reduce labour and mine additional shifts, including holidays
and Sundays at 4 shaft, have been successfully completed. This should allow
greater flexibility with an increase in volumes and a decrease in costs in the
next quarter.
Total cash costs increased 1 percent in rand terms to R78,143 per kilogram and
increased to US$358 per ounce from US$354 per ounce last quarter. Operating
profit increased from R18 million (US$3 million) to R40 million (US$6 million)
quarter on quarter mainly due to the higher gold price received. Capital
expenditure decreased from R83 million (US$13 million) last quarter to R67
million (US$12 million) this quarter.
Production in the June 2004 quarter should improve marginally compared with
the March 2004 quarter.
International Operations
Ghana
TARKWA
March December
2004 2003
Gold produced - 000"ozs 137.4 141.8
Total cash costs - US$/oz 237 227
Gold produced for the quarter decreased to 137,400 ounces compared with 141,800
ounces in the December quarter. The decrease in gold production is primarily as
a result of a build up of gold in process on the heaps of 4,500 ounces this
quarter compared with a release of 10,400 ounces in the previous quarter. The
gold in process move reflects the move to stacking on higher lifts on the leach
pads this quarter, and the associated slower gold recovery rates from higher
lifts. With the lag time from gold stacking on the heaps to gold production
being at least three months, this gold in process reversal also reflects lower
volumes of recoverable gold stacked in the December quarter. While ore tonnage
treated only increased by some 6 per cent, total volumes mined increased by
some 23 per cent, reflecting an increase in waste movement. The stripping ratio
increased to 2.7 compared with 2.2 in the December quarter. The increase in
stripping ratio reflects a previously reported drive to increase mining
flexibility, particularly ahead of the conversion to owner mining in the new
fiscal year.
Operating costs increased from US$30 million to US$34 million in line with the
increase in volumes mined. Unit costs increased from US$7.76 per ton treated to
US$8.06 per ton, reflecting the increase in stripping ratio. The increase in
operating expenditure, coupled with the slightly lower gold production, led to
a 4 per cent increase in total cash costs to US$237 per ounce. Tarkwa
contributed US$23 million to operating profit, which is in line with the
previous quarter.
The increase in capital expenditure this quarter from US$28 million to US$45
million reflects expenditure on the mining fleet, which amounted to US$16
million for the quarter compared with US$3 million last quarter and further
expenditure on the mill construction project of US$27 million as compared with
US$20 million last quarter. The mill construction project remains on track for
commissioning in the quarter ended December 2004. The balance of capital
expenditure on this project amounts to US$31 million. The conversion to owner
mining should be finalised by the end of the September 2004 quarter. The
balance of capital expenditure on this project amounts to US$55 million, with
the majority of this expenditure due in the June 2004 quarter.
Gold production is expected to be similar to the levels achieved in the last
two quarters, subject to gold in process movements, which remains difficult to
predict. Operating costs in the June quarter will be similar to the current
levels as the mine continues to focus on maintaining the current strip ratios.
DAMANG
March December
2004 2003
Gold produced - 000"ozs 78.1 77.5
Total cash costs - US$/oz 219 236
Gold produced for the quarter increased to 78,100 ounces compared with 77,500
ounces in the December quarter. A slight reduction in ore tonnages treated, due
to a planned mill shutdown, was offset by an increase in yield from 1.8 gram
per ton to 1.9 gram per ton, due to the availability of larger volumes of high
grades ore from the Damang pit. The tons mined increased by 8 per cent to 4
million tons with the stripping ratio reducing from 1.88 to 1.82. The increase
in volume of ores from the Damang pit, as well as the Kwesie and Lima pits,
reduced the amount of stockpile tonnages treated this quarter in comparison
with the previous quarter.
Operating costs increased marginally to US$17 million in line with the increase
in volumes mined. Total cash costs however reduced from US$236 to US$219
quarter on quarter, largely reflecting limited gold in process charges in this
quarter against some US$15/oz in the December quarter, in line with the
reduction in stockpile consumption in the current quarter referred to earlier.
Unit costs per ton treated remained virtually unchanged. The net result was an
increase in operating profit to US$15 million from US$13 million in the
previous quarter.
Gold production is expected to be slightly lower in the June quarter reflecting
a reduction in the availability of higher grade ores in the Damang pit. Total
cash costs will increase to levels seen in the December quarter reflecting the
lower grades and further consumption of stockpiles and the associated gold in
process charges.
Australia
STIVES
March December
2003 2003
Gold produced - 000"ozs 131.8 140.1
Total cash costs - A$/oz 442 395
- US$/oz 338 280
Gold production at St Ives was 131,800 ounces, a decrease of 6 per cent when
compared with the December quarter"s production of 140,100 ounces. This
decrease was due to a decline in volumes treated largely due to a maintenance
shutdown of the mill and a reduction in the volume of toll treatment, with the
termination of tolling at the South Hannan"s mill, interruptions due to heavy
rain and a slight decline in head grades.
Ore production from underground increased by some 30 per cent with ongoing
build up from the Argo and Leviathan mines. This increase in the availability
of high grade ores was offset by grade recovery problems in the Mars pit
during the quarter, leading to lower grades from this key source of ore. As a
result gold production was not maintained as had been expected.
Operating costs at A$56 million (R287 million, US$42 million) were similar to
the previous quarter. Total cash costs were A$442 per ounce (US$338 per ounce)
for the March quarter compared with A$395 per ounce (US$280 per ounce) in the
December quarter. The increase in cash costs reflects the lower volume of gold
produced, the cost of the mill shutdown, a A$5 million gold in process charge
associated with consumption of stockpiles and the impact of continued build-up
at the underground mines. St Ives contributed A$11 million (R58 million, US$9
million) to operating profit compared with A$21 million (R104 million, US$15
million) in the previous quarter. The gold price achieved of A$538 per ounce
was 2 per cent below the December quarter.
Capital expenditure increased to A$50 million (R239 million, US$38 million) in
the March quarter from A$21 million (R107 million, US$16 million) in the
December quarter mainly due to expenditure on the mill optimisation project,
which commenced this quarter and amounted to A$19 million (R91 million, US$ 14
million). In the June quarter it is anticipated that an amount of A$56 million
(R274 million, US$42 million) will be spent.
Gold production and total cash costs should return to levels seen in the
December quarter.
AGNEW
March December
2004 2003
Gold produced - 000"ozs 52.8 50.1
Total cash costs - A$/oz 304 296
- US$/oz 233 210
Gold production at Agnew increased 5 per cent to 52,800 ounces for the quarter.
This reflected an increase in the volume of high grade ores treated from
underground, primarily from the Kim mine, which displaced lower grade
stockpiled ores.
The mine reported a marginal increase in total cash costs in Australian dollars
from A$296 per ounce (US$210 per ounce) last quarter, to this quarter"s A$304
per ounce (US$233 per ounce) as a result of increased underground mining
volumes. The contribution to operating profit from Agnew was A$12 million (R61
million, US$9 million) compared with A$13 million (R61 million, US$9 million)
last quarter. Capital expenditure was the same as last quarter at A$7 million
(R30 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. As a result of the
anticipated
closure during the June quarter of the Crusader/Deliverer underground
operation, production in the next quarter is expected to be some 10 to 20 per
cent lower than the last two quarters, with a concomitant effect on margins.
Capital and development projects
ST IVES EXPANSION PROJECT
During the quarter construction of the new 4.5 million ton per annum mill CIP
process plant at St Ives made good progress, following site mobilisation at the
end of the December quarter. In the March quarter, site levelling, construction
of the ROM pad and casting of the SAG mill and crusher foundations were well
advanced, while the SAG mill and ancillary equipment was delivered to site.
By quarter end some 75 per cent of engineering works had been completed while
commitments in respect of 50 per cent of the total capital expenditure had been
made. The project remains on track for commissioning in the December 2004
quarter at a total cost of A$125 million.
TARKWA EXPANSION PROJECT
CIL Process Plant
The new 4.2 million ton per annum m
