| Thu 29 Jul 2004, 9:05 | | Results for the Quarter and Year Ended 30 June 04 |
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Gold Fields Limited - Results for the Quarter and Year Ended 30 June 2004
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
Q4 F2004 RESULTS
Results for the Quarter and Year Ended 30 June 2004
-Reviewed preliminary results-
STOCK DATA
Number of shares in issue
- at end June 2004 491,480,690
- average for the quarter 491,431,716
Free Float 100%
ADR Ratio 1:1
Bloomberg / Reuters GFISJ / GFLJ.J
JSE SECURITIES EXCHANGE SOUTH AFRICA - (GFI)
Range - Quarter ZAR85.00 - ZAR65.02
Average Volume - Quarter 1,398,900 shares / day
NYSE - (GFI)
Range - Quarter US$13.40 - US$9.77
Average Volume - Quarter 1,188,600 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
RESTRUCTURING DELIVERING RESULTS INCREASED GOLD PRODUCTION AND LOWER COSTS
JOHANNESBURG. 29 July 2004 - Gold Fields Limited (NYSE & JSE: GFI) today
announced June 2004 quarter headline earnings of R129 million (26 cents per
share) compared with headline earnings of R221 million (45 cents per share) in
the March 2004 quarter and R494 million (104 cents per share) for the June
quarter of 2003. The reduction in earnings is largely gold price and exchange
rate related and masks a solid operating performance. In US dollar terms the
June 2004 quarter headline earnings were US$20 million (US$0.04 per share)
compared with US$32 million (US$0.07 per share) in the March 2004 quarter and
US$64 million (US$0.14 per share) for the June quarter of 2003.
June 2004 quarter salient features:
*Attributable gold production increased to 1,042,000 ounces;
*Total cash costs decreased 2 per cent to R66,218 per kilogram
(US$312 per ounce);
*Operating profit down 17 per cent to R545 million (US$83 million),
exclusively due to a 6 per cent reduction in the rand gold price to R83,731
per kilogram (US$395 per ounce);
*Organic growth projects on track in Australia and Ghana;
*Write-down of R426 million (US$62 million) at Beatrix 4 shaft.
Year ended June 2004 salient features:
*Attributable gold production of 4,158,000 ounces;
*Total cash costs R67,075 per kilogram (US$302 per ounce) 9 per cent up on
previous year;
*Mvela transaction successfully concluded;
*Sale of Driefontein`s block 1C11 to AngloGold for R315 million, yielding a
profit of R240 million net of taxation;
*Strong financial position provides platform for growth;
*Offshore organic growth projects announced.
Final dividend of 40 SA cents per share, giving a total dividend of 80 SA cents
per share for the year.
Ian Cockerill, Chief Executive Officer of Gold Fields said:
`While earnings were affected by the continued strengthening of the South
African currency during the quarter, Gold Fields again had a strong operational
performance overall.
Despite the strategic repositioning of the South African operations over the
past nine months, to counterbalance the strong rand, having had the desired
effect, further interventions are being put in place in anticipation of a rand
per kilogram price of below R80,000 per kilogram.
Overall, Gold Fields is in a good position with significant progress being made,
in particular, with the international growth projects in Ghana, Australia, Peru
and Finland. Furthermore, the exploration programme has during the quarter
delivered promising results with significant improvements in the prospect of
several projects.
During the quarter Gold Fields sent a technical team to Russia to conduct visits
at the Norilsk gold operations with a view to exploring the potential for co-
operation with regards to our respective gold assets. The process of evaluating
the results of this visit are underway, and initial results are encouraging
enough to continue this process.`
Salient features
SA Rand
Year ended Quarter
June June June March June
2003 2004 2003 2004 2004
Gold produced* 134,813 129,329 32,380 32,131 32,419 kg
Total cash costs 61,766 67,075 63,369 67,528 66,218 R/kg
Tons milled 42,988 46,028 10,925 11,815 11,076 000
Revenue 97,060 85,905 86,751 88,887 83,731 R/kg
Operating costs 213 204 204 199 213 R/ton
Operating profit 4,741 2,315 717 656 545 Rm
2,953 768 789 255 (186) Rm
Net earnings 626 158 167 51 (39) SA c.p.s.
2,393 763 494 221 129 Rm
Headline earnings 507 157 104 45 26 SA c.p.s.
Net earnings excluding
gains and losses on 2,011 587 226 238 102 Rm
financial instruments and
foreign debt net of cash 426 121 48 48 21 SA c.p.s.
and exceptional items
US Dollars
Quarter Year ended
June March June June June
2004 2004 2003 2004 2003
Gold produced* oz (000) 1,042 1,033 1,041 4,158 4,334
Total cash costs $/oz 312 309 255 302 212
Tons milled 000 11,076 11,815 10,925 46,028 42,988
Revenue $/oz 395 407 349 387 333
Operating costs $/ton 32 29 26 30 23
Operating profit $m 83 96 100 336 523
$m (25) 38 98 111 326
Net earnings US c.p.s. (5) 7 21 23 69
$m 20 33 64 111 264
Headline earnings US c.p.s. 4 7 14 23 56
Net earnings excluding $m 16 34 34 85 222
gains and losses on
financial instruments and US c.p.s. 4 7 8 18 47
foreign debt net of cash
and exceptional items
*Attributable - All companies wholly owned except for Ghana (71.1%).
Health and Safety
During the quarter the lost day injury frequency rate at the operations improved
from 13.8 to 11.9, the serious injury frequency rate improved from 6.5 to 5.9
and the fatal injury frequency rate unfortunately regressed from 0.15 to 0.26.
While the improvement in total safety performance is commendable, the
deterioration in the fatal injury frequency rate is a source of concern. Health
and safety of our workforce is the most important aspect of the business and
continued focus will be given to initiatives aimed at eradicating injuries and
fatalities.
Beatrix achieved two million fatality free shifts during the quarter and Beatrix
1,2 and 3 shafts in aggregate achieved one million underground fatality free
shifts.
In addition, Damang and the Australian operations continue to be fatality free,
with Damang having recorded only one lost day injury in sixteen months.
Fina ncia l Review
Quarter ended 30 June 2004 compared with quarter ended 31 March 2004
REVENUE
Attributable gold production increased marginally to 1.042 million ounces for
the June 2004 quarter compared with 1.033 million ounces achieved in the March
2004 quarter. However, notwithstanding the higher production in the June
quarter, revenue at R2,869 million (US$434 million) was 5 per cent lower than
the March quarter`s R3,028 million (US$444 million). This decrease was due to a
6 per cent lower rand gold price. The gold price achieved for the June quarter
was R83,731 per kilogram (US$395 per ounce), compared with R88,887 per kilogram
(US$407 per ounce) in the March quarter. Apart from the impact of a lower dollar
gold price, the rand gold price was also affected by a strengthening of the rand
against the US dollar from an average of R6.79 to R6.60 quarter on quarter.
OPERATING COSTS
Operating costs for the June quarter at R2,364 million (US$357 million)
increased 0.5 per cent compared with the March quarter`s R2,351 million (US$345
million) evidencing continued good cost control. Although costs at the
international operations of R711 million were virtually unchanged from the R707
million reported in the March quarter, a cost increase at St Ives associated
with additional mining volume was offset by the impact of translating costs at
the international operations into South African rand at a stronger local
exchange rate. The increased mining volume at St Ives is reflected in a credit
to gold in process of R40 million (US$6 million) compared with a gold in process
charge in the March quarter of R22 million (US$3 million), which was due to a
gold in process release at the Australian operations in the previous quarter.
OPERATING PROFIT MARGIN
The net effect of the lower revenue, despite lower costs after taking account of
gold in process movements, was an operating profit of R545 million (US$83
million), 17 per cent lower than the R656 million (US$96 million) achieved in
the March quarter. The Group margin decreased to 19 per cent from 22 per cent in
the March quarter and the South African margin decreased from 14 per cent to 9
per cent. This reduction in margin was virtually all due to the lower price
achieved. The margin at the international operations increased to 36 per cent
from 34 per cent in the March quarter.
AMORTISATION
Amortisation for the June quarter at R332 million (US$50 million) was 12 per
cent higher than the March quarter`s R298 million (US$44 million). This increase
was due to increased mining volumes at the international operations, which
carries a higher rate of amortisation than the local operations. Amortisation at
the South African operations was virtually unchanged.
OTHER INCOME
Net interest and investment income at R28 million (US$4 million) increased from
negative R4 million (US$1 million negative) quarter on quarter. This was due to
interest earned on the net Mvela cash receipts of R3.8 billion received on 17
March, partly offset by the interest payable on the Mvela debt arising from this
transaction. Gains on foreign debt and cash amounted to R76 million (US$11
million), compared with a loss of R34 million (US$5 million negative) in the
March quarter. Included in this income is an accounting exchange gain of R86
million (US$12 million) on the settlement of an offshore inter-company loan with
no attendant cash flow implications, partly offset by an exchange loss on
offshore funds held in euros of R10 million (US$1 million). Euro 176 million is
currently held offshore and arises from the capital raising undertaken in
November 2003. The loss on the euros is due to the strengthening of the US
dollar from 1.2270 euros to the US dollar at the start of the quarter to 1.2175
at the end of June.
A loss on financial instruments of R71 million (US$10 million) was incurred,
which includes a loss on rand/US dollar forward cover of R19 million, and a
marked to market loss on an interest rate swap of R52 million (US$8 million).
The interest rate swap was established in relation to the loan from Mvela Gold,
a wholly owned subsidiary of Mvela Resources and converted a fixed interest rate
exposure to a floating rate. This instrument was established as short-term rates
are significantly lower than long-term rates and the resultant upward sloping
yield curve is expected to prevail for some time. Despite the marked to market
loss associated with a change in the profile of the five year yield curve, this
strategy is yielding positive results with an R18 million cash benefit in the
period to end June 2004 and a R12 million cash benefit locked in for the three
month period to September 2004. More detail on these financial instruments is
given on page 11 of this report.
Other income reduced from a positive R26 million (US$4 million) to a negative
R31 million (US$4 million negative) in the June quarter. This change was mainly
due to gains realised on the exchange of exploration joint venture interests for
equity in the previous quarter along with positive adjustments to the Group`s
post-retirement health care provisions in that period, together with costs
incurred during the current quarter associated with projects aimed at optimising
stores consumption and procurement practices in the Group and restructuring
costs in the Group`s Shared Services division. To this end, an e-auction on
conveyor belting used as a pilot study has already resulted in an annual saving
of R10 million, which translates to a reduction of some 40 per cent.
Exploration expenditure increased from R44 million (US$7 million) to R62 million
(US$9 million) in the June quarter in line with the planned increase in
activity, mainly in West Africa and Latin America.
The exceptional loss of R432 million (US$62 million) is primarily as a result of
the impairment at Beatrix 4 shaft (formerly Oryx) of R426 million (US$62
million) being R315 million (US$45 million) after the associated taxation
effect. The post write-down carrying value of Beatrix 4 shaft is R75 million.
Last quarter`s exceptional gain amounted to R21 million (US$3 million) and
included profit on the sale of the remaining shares in Harmony and Committee
Bay, partly offset by the write-off of certain mineral rights.
TAXATION
A taxation credit of R124 million (US$18 million) was realised in the June
quarter compared with a charge of R64 million (US$9 million) in the March
quarter. This is mainly due to a deferred tax credit on the impairment at
Beatrix of R111 million (US$17 million) and a tax credit of R26 million on the
loss on financial instruments. Further deferred tax credits of R76 million were
generated due to increases in unredeemed capital expenditure balances at all of
the South African operations. This was partially offset by a R30 million (US$5
million) deferred tax charge as a consequence of the Mvela transaction.
EARNINGS
After accounting for minority interests, a loss of R186 million (US$25 million)
was incurred or negative 39 SA cents per share (US$0.05 per share negative),
compared with earnings of R255 million (US$38 million) or 51 SA cents per share
(US$0.07 per share) in the previous quarter.
Headline earnings i.e. earnings less the after tax effect of asset sales,
impairments and the sale of investments, amounted to R129 million (US$20
million) or 26 SA cents per share (US$0.04 per share) compared with R221 million
(US$32 million) or 45 SA cents per share (US$0.07 per share) last quarter. The
main reason for this decrease was the fall in net operating profit associated
with lower achieved prices received in the June quarter.
Earnings, excluding exceptional items as well as net gains on financial
instruments and foreign debt net of cash after taxation, amounted to R102
million (US$16 million) or 21 SA cents per share (US$0.04 per share) compared
with R238 million (US$34 million) or 48 SA cents per share (US$0.07 per share)
achieved last quarter.
CASH FLOW
Cash flow from operating activities for the quarter was R436 million (US$66
million), compared with operating cash flow in the March quarter of R528 million
(US$77 million). The decrease reflects the decline in operating profit.
Capital expenditure was R938 million (US$139 million) compared with R749 million
(US$109 million) in the March quarter. The increase is mainly due to increased
expenditure on organic growth projects in Ghana and Australia. R185 million
(US$33 million) was expended at the South African operations. This is an
increase of R32 million (US$5 million) over the previous quarter, the majority
at Kloof 4 shaft. The Australian operations incurred capital expenditure of R308
million (A$83 million). The mill project at St Ives accounted for R224 million
(A$45 million) of this expenditure as compared to R91 million (A$19 million) in
the March quarter. The balance on this project, the majority of which will be
spent during the September quarter, amounts to A$61 million. At the Ghanaian
operations, capital expenditure amounted to R401 million (US$67 million). R361
million (US$58 million) was spent on the new mill and on the project to convert
from contract mining to owner mining. This compares with R263 million (US$43
million) in the previous quarter. The balance on these projects, the majority of
which will be spent in the next two quarters, amounts to US$30 million. 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 quarter.
Net cash outflow for the quarter was R497 million (US$74 million). The cash
balance at the end of the June quarter was R4,135 million (US$656 million)
compared with R4,701 million (US$721 million) at the end of the March quarter.
Detailed and Operational Review
Group Overview
Attributable gold production for the June 2004 quarter increased marginally to
1,042,000 ounces when compared with the March quarter. Attributable production
from the international operations was virtually unchanged at 342,000 ounces,
which is approximately one third of the Group`s total attributable production.
Production from the Australian operations increased 6 per cent to 196,300
ounces this quarter due to increased volumes from St Ives. Operating profit
from the Australian operations increased 34 per cent to R159 million (A$33
million, US$24 million) for the quarter, primarily as a result of the increased
production and increased gold price. The gold price in Australian dollars
increased 4 per cent from A$536 per ounce to A$556 per ounce quarter on
quarter. The Ghanaian operations showed a 5 per cent decrease in attributable
gold production to 146,200 ounces, partly due to reduced ore volumes associated
with lack of flexibility in the pits exacerbated by poor equipment
availability.
Ghana contributed operating profit of R224 million (US$34 million), a 15 per
cent decrease on the previous quarter`s operating profit. The reduced operating
profit is due to the decrease in gold production and the cost of accelerated
stripping at Tarkwa.
The international operations contributed R383 million (US$58 million) of the
total operating profit of R545 million (US$83 million) or 70 per cent, compared
with R382 million (US$56 million) of the total operating profit of R656 million
(US$96 million) or 58 per cent last quarter.
At the South African operations, production was 699,700 ounces, similar to the
previous quarter. The decrease at Beatrix related to lost days due to the
elections and the Easter break, was offset by a 3 per cent increase in output
at Kloof due to an increase in underground tonnage. Operating profit at the
South African operations decreased from R274 million (US$40 million) to R163
million (US$25 million) mainly as a consequence of the lower gold price.
Group ore milled decreased from 11.82 million tons to 11.08 million tons due to
an 11 per cent decrease in surface tons, mainly at Beatrix, Tarkwa and St Ives.
The overall yield increased from 2.9 grams per ton in the March quarter to 3.1
grams per ton in the current quarter. Total cash costs in rand terms decreased
from R67,528 per kilogram to R66,218 per kilogram quarter on quarter mainly as
a result of the increased production. In US dollar terms, total cash costs were
virtually unchanged at US$312 per ounce compared with US$309 per ounce.
Operating cost per ton at R213 increased from R199 last quarter due to the
lower surface tonnage.
South African Operations
During the September 2003 quarter management took a view that the South African
currency would remain stronger for longer. As a result it was decided to
reposition the South African operations. This was presented as reverting from
the `Wal-Mart` strategy (more volume at lower grade) to the `SAKS 5th Avenue`
strategy (less volume at higher grade).
To support this switch in strategy, management introduced an initiative called
Project 500, which, in turn, was split into two sub-projects called: Project
400 and Project 100.
Project 400 aims to optimise revenue such that an additional R400 million is
generated per annum. The aim is to improve the quality and quantity of our
outputs by replacing surface tonnage to the plant with increased tonnage from
underground and ensuring output of a better quality, by mining the higher
grades at marginally reduced volume.
This strategy has started to deliver results as was evidenced in the March
quarter at Kloof and Driefontein, which both reported increased underground
grades, and has continued into this quarter.
It should be emphasised that the operations are producing in line with the
proven reserve grades for life of mine. Naturally, paylimits have to change to
reflect current earnings and despite some ill-informed market commentary, Gold
Fields continues to prudently manage its ore reserves and is not high grading
as the table below clearly shows.
Quarter ended Sep Dec Mar Jun
2003 2003 2004 2004
Driefontein:
Life of mine head grade as per the 2003
annual report 8.7 8.7 8.7 8.7
Life of mine head grade adjusted for
estimated metallurgical recoveries 8.4 8.4 8.4 8.4
Driefontein (underground yields
achieved) 8.1 7.5 8.6 8.5
Kloof:
Life of mine head grade as per the 2003
annual report 9.8 9.8 9.8 9.8
Life of mine head grade adjusted for
estimated metallurgical recoveries 9.5 9.5 9.5 9.5
Kloof (underground yields achieved) 8.1 8.6 10.0 9.5
Beatrix:
Life of mine head grade as per the 2003
annual report 5.1 5.1 5.1 5.1
Life of mine head grade adjusted for
estimated metallurgical recoveries 4.9 4.9 4.9 4.9
Beatrix (underground yields achieved) 4.4 4.7 4.5 4.7
Project 100 is designed to save a minimum of R100 million a year from
improved standards and norms by reducing wastage and making sure that the
mines use only what is required for a successful blast.
Having carefully examined the prospects for Project 100 it soon became clear
that initial estimates of R100 million savings were conservative. Consequently,
the bar has been raised and Gold Fields is also aiming to achieve R200 million
to R300 million in savings per annum from improved procurement practices in
the medium term. The group spends in excess of R3 billion on materials and
services, of which R1.5 billion is spent on materials used on the mines and more
than R1.4 billion is spent on total services provided. The aim is to reduce
procurement spend by 7 to 10 per cent by improving efficiencies, leveraging off
Group buying power and adopting strategic sourcing techniques. Forming
business partnerships with suppliers, entering into risk reward type sharing
arrangements, increasing supply coverage, as well as rationalising vendors
without compromising on quality, would be some of the aspects considered in
this regard.
Over the past 15 months Gold Fields has reduced total stores inventory by some
30 per cent. This was achieved by combining all the stores into one on the West
Wits. This rationalisation of stores has resulted in a reduction in line items
from 16,000 to 3,000. Vendor price increases have been controlled at between
one and two percent below PPI and there has been a marked reduction in vendors,
from 3,000 to the current 870.
Project 500 will reinstate more respectable margins at current prices and aims
to achieve the following at Driefontein, Kloof and Beatrix:
Driefontein
* Mine in a range of between 1,900 and 2,100 centimetre grams per ton
(`cmg/t`). This translates to an estimated underground recovered yield of
above 8.0 grams per ton.
* Implement restructuring and cost saving measures of R2.0 million per month.
* Maintain the production profile at + 1 million ounces per annum. Kloof
* Mine in a range of between 2,200 and 2,350 cmg/t. This translates to an
estimated underground recovered yield of above 9.0 grams per ton.
* Implement restructuring and cost saving measures of R2.0 million per month.
* Maintain the production profile at + 1 million ounces per annum. Beatrix
* Mine in a range of between 1,000 and 1,100 cmg/t at number 1, 2 and 3
shafts and in a range of between 1,400 and 1,500 cmg/t at number 4 shaft.
This translates to an estimated combined underground recovered yield of
4.8 grams per ton.
* Implement restructuring and cost saving measures of R1.5 million per month.
* Maintain the production profile of +600 thousand ounces per annum.
A full explanation of project 500 can also be found on the Gold Fields website -
www.goldfields.co.za
General
The South African operations have, over the past 48 months undergone extensive
restructuring and renewal to reposition for the future. On each of our
operations, we have invested significantly in the construction and development
of new long life shafts. At Driefontein, capital has been invested into 5 east
and 1 tertiary shafts; at Kloof the new 4 shaft; and Beatrix the new 3 shaft.
In addition, our metallurgical plants have been upgraded. Environmental
conditions at all shafts have and are being improved through the on going
lowering of temperatures, and infrastructure bottlenecks are being resolved.
Over this period Gold Fields has also invested significantly in the development
of its ore bodies, with all the key long life shafts now having an average of
20 months of mineable developed ore reserves in place.
Occupational health care services are made available by Gold Fields to
employees from its existing facilities. There is a risk that the cost of
providing
such services could increase in the future depending upon changes in the nature
of underlying legislation and the profile of employees. This increased cost,
should it transpire, is currently indeterminate. The Group is monitoring
developments in this regard.
DRIEFONTEIN
June March
2004 2004
Gold produced - 000`ozs 290.3 289.6
Yield - underground - g/t 8.5 8.6
- overall - g/t 5.6 5.4
Total cash costs - R/kg 67,372 67,607
- US$/oz 317 310
Production at Driefontein at 290,300 ounces was similar to the previous quarter.
Underground tonnage increased 11 per cent from 838,000 tons to 927,000 tons.
This was due to the impact of the Christmas break last quarter. The
underground yield achieved was 8.5 grams per ton, which was in line with the
previous quarter. Surface tonnage was 15 per cent lower at 695,000 tons due to
lower volumes from surface clean up, in line with our forecast. Surface yields
decreased from 2.2 grams per ton to 1.7 grams per ton for the quarter following
the conclusion of processing of high grade material and plant clean up.
Operating costs were virtually unchanged at R637 million (US$96 million)
despite the increase in underground volumes. Total cash costs in rand terms
were marginally below the March quarter at R67,372 per kilogram and increased 2
per cent in US dollar terms to US$317 per ounce due to the stronger rand.
Operating profit was down from R158 million (US$23 million) in the March
quarter to R121 million (US$18 million) in the June quarter as a result of the
lower gold price received
Capital expenditure amounted to R40 million (US$7 million) compared with R29
million (US$6 million) in the March quarter. As a result of the lower gold price
and reduced earnings, capital expenditure continues to be reprioritised and non
crucial items deferred.
Gold output in the September quarter is expected to be marginally lower than
the June quarter. This is due to increased seismicity in July at 5 east shaft,
lower flexibility resulting from the stoppage of marginal areas and the
conclusion of plant clean up. Improvements to ventilation will enable increased
face length going forward, resulting in improved flexibility. This should
result in a steady production performance over the remainder of the year. Costs
will increase by some 3 per cent due to the annual wage increase, effective
from July.
KLOOF
June March
2004 2004
Gold produced - 000`ozs 259.2 250.9
Yield - underground - g/t 9.5 10.0
- overall - g/t 6.6 6.4
Total cash costs - R/kg 74,191 75,920
- US$/oz 350 348
Gold production at Kloof increased 3 per cent to 259,200 ounces in the June
quarter from 250,900 ounces in the March quarter. Underground tonnage
increased 10 per cent to 818,000 tons this quarter from 744,000 tons in the
March quarter, which was negatively affected by the extended Christmas break.
Surface tons decreased from 483,000 tons to 407,000 tons as a result of the
increased underground volumes. The underground yield has as planned
decreased from 10.0 grams per ton last quarter to 9.5 grams per ton this
quarter,
with the combined yield increasing from 6.4 grams per ton to 6.6 grams per ton,
due to the improved mix from the higher grade underground tonnage.
Operating costs at R621 million (US$94 million) for the quarter were virtually
unchanged when compared with the previous quarter`s costs of R617 million
(US$91 million). Total cash costs at R74,191 per kilogram were 2 per cent lower
than the previous quarter`s R75,920 per kilogram. In US dollar terms total cash
costs were virtually unchanged at US$350 per ounce. Operating profit
decreased by one third to R49 million (US$7 million) compared to R75 million
(US$11 million) the previous quarter due to the lower gold price received this
quarter.
Capital expenditure increased from R57 million (US$10 million) in the March
quarter to R76 million (US$14 million) in the June quarter. The majority of this
expenditure was on reprioritising and accelerating the capital at 4 shaft.
The gold production outlook for the September quarter is expected to be slightly
up on the June quarter, with operating costs forecast to increase some 3 per
cent due to the annual wage increases.
BEATRIX
June March
2004 2004
Gold produced - 000`ozs 150.2 154.7
Yield - underground - g/t 4.7 4.5
- overall - g/t 3.8 3.3
Total cash costs - R/kg 81,978 78,143
- US$/oz 386 358
Gold production at Beatrix decreased 3 per cent from 154,700 ounces in the
March quarter to 150,200 ounces in the June quarter. Underground ore was down 3
per cent from 1,003,000 tons to 968,000 tons due mainly to the impact of the
public holidays over Easter, the election break and a one day work stoppage
because of the implementation of an internal restructuring programme to reduce
costs. Underground yields increased marginally to 4.7 grams per ton. In
particular, 2 shaft and 4 shaft have seen positive volume and grade
improvements and are well positioned for the coming quarter. The stoping and
development build up at 3 shaft, as well as accompanying exploration drilling
is progressing well and results are in line with forecast. Beatrix experienced
lower mine call factors (MCF) during the past two quarters and specific focus
has been applied towards improved quality of sweepings, water usage and
fragmentation.
Surface tons decreased significantly from 450,000 tons to 254,000 tons as last
quarter included surface tons milled over the Christmas break. The surface
yield remained at the March quarter level of 0.6 grams per ton and this is the
forecast going forward.
Operating costs increased from R390 million (US$57 million) to R395 million
(US$60 million) and total cash costs increased 5 per cent from R78,143 per
kilogram (US$358 per ounce) to R81,978 per kilogram (US$386 per ounce) due to
the lower gold production. An operating loss of R7 million (US$1 million) was
incurred due to the lower production and the previously discussed lower gold
price, as compared with a profit of R40 million (US$6 million) in the March
quarter.
Beatrix 4 shaft (formerly Oryx) was impaired R426 million (US$62 million)
during the quarter, with the after tax effect amounting to R315 million (US$45
million).
The impairment was based on a calculated net present value, using a gold price
of R90,000 per kilogram at a real discount rate of 5 per cent. The carrying
value of Beatrix 4 shaft after the write-down is R75 million.
Capital expenditure amounted to R69 million (US$12 million), similar to the
March quarter. The majority of this expenditure was spent on development at 3
shaft and the Sand River block adjacent to 4 shaft.
Gold production will be flat for the September quarter due to cessation of toll
milling at Joel, who have given notice that they will stop our toll treatment
at the end of July 2004. Costs will be affected by the July wage increase which
has an impact of approximately 3 per cent on total working costs.
International Operations
Ghana
TARKWA
June March
2004 2004
Gold produced - 000`ozs 123.1 137.4
Total cash costs - US$/oz 251 237
Tarkwa`s June quarter gold production was disappointing at 123,100 ounces, down
10 per cent on the previous quarter, contrary to expectations reported
previously. This drop in gold production was primarily due to a reduction in
ore mining volumes and thus recoverable ounces that were stacked on the leach
pads, particularly in the April and May months. Mined grade was stable quarter
on quarter at 1.44 gram per ton. The drop in ore mining rate was caused by a
lack of flexibility in the open pits, in particular the availability of ores in
the high grade pits, compounded by mining equipment availability. The former
problem is being resolved with additional waste stripping that was pursued
during the quarter. The strip ratio in the June quarter was 3.4 against 2.7 in
the March quarter. The equipment availability will clearly be addressed by the
conversion to owner mining and the associated commissioning of a new mining
fleet that was largely complete by month end (refer later in this report for
details of the Owner Mining Project). By quarter end the mining operations had
improved significantly and have continued to do so to the time of reporting.
The increased flexibility and build up in volumes from the new mining fleet
resulted in increased tonnage through the crushing plants towards the end of
the quarter at higher grades, but too late to recover the gold from the heaps
by quarter end. This resulted in an increase in gold in process of 8,255
ounces.
Operating costs at US$31 million (R219 million), including gold in process
adjustments, were slightly lower than the previous quarter despite total mining
volumes being some 2.3 million tons ahead of that mined in the previous
quarter, at 18.5 million tons. Operating costs were US$8.63 per ton against
US$8.06 per ton in the March quarter, primarily reflecting the increase in
stripping ratio. With the head grade stable, the higher strip ratio and lower
gold volumes translated into a 6 per cent increase in total cash costs to
US$251 per ounce. The net result was a drop in operating profit from US$23
million (R159 million) to US$18 million (R116 million).
The majority of the increase in capital expenditure, from US$45 million (R281
million) to US$65 million (R392 million) in the June quarter reflects
expenditure on the major projects i.e. the mill construction and owner mining
projects. Refer to Tarkwa Expansion Project commentary.
Gold production is expected to increase in the September quarter, closer to
levels seen in the March quarter, subject to gold in process movements, which
remain difficult to predict. Operating costs in the September quarter are
expected to be lower than the current period as a result of the transition to
owner mining, reaching completion in this period
DAMANG
June March
2004 2004
Gold produced - 000`ozs 82.5 78.1
Total cash costs - US$/oz 205 219
Gold production for the quarter increased to 82,500 ounces compared to 78,100
ounces in the March quarter. This reflects a 7 per cent increase in mill
throughput to 1,391,000 tons this quarter, a record performance, with the head
grade stable at 2.1 grams per ton. The March quarter included a maintenance
shut down. The tons mined decreased by 9 per cent to 3.6 million tons, with the
stripping ratio reducing from 1.82 to 1.71.
Operating costs quarter on quarter including gold in process adjustments were
flat at US$17 million (R113 million), with the reduction in mining volumes and
costs offset by the increase in milling volumes and costs. Unit costs per ton
treated therefore decreased to US$12.24 per ton from US$13.05 per ton in the
March quarter. Total cash costs however reduced from US$219 per ounce to US$205
per ounce quarter on quarter, as a result of the increase in gold production.
The net result was an increase in operating profit to US$16 million (R107
million) from US$15 million (R104 million) in the previous quarter.
Capital expenditure of US$1.5 million (R9 million) was spent during the
quarter, mainly on drilling at Abosso Deeps and the Damang Extension Project.
Refer Damang Extension Project commentary.
Gold production is expected to be considerably lower in the September quarter
with the expected reduction in high grade sources of ore at Damang,
particularly the Damang pit, which was due for depletion in the middle of the
F2005 year.
There will be a concomitant effect on unit costs.
Australia
STIVES
June March
2004 2004
Gold produced - 000`ozs 143.6 131.8
Total cash costs - A$/oz 422 442
- US$/oz 304 338
Gold production for the quarter increased 9 per cent to 143,600 ounces when
compared to 131,800 ounces produced in the March quarter. This increase largely
reflects a substantial improvement in head grades to the St Ives mill and toll
treatment facility. (The March quarter included a maintenance shutdown at the
mill). The improvement in grade reflects resolution of the grade recovery
problems reported in the March quarter in the Mars open pit but also the
ongoing increase in the volume of high grade ores from the new underground
mines, particularly the Argo mine, while the Junction mine also performed well.
Toll treatment delivered some 33,000 ounces, from 325,000 tons treated for the
quarter, against 26,000 ounces in the March quarter. The decrease in ore
volumes treated from 1.72 million tons to 1.49 million tons, is largely due to
a reduction in tonnage at the heap leach plant, as that plant`s crusher had to
be used to augment volumes through the St Ives mill crusher, due to problems
with the mantle and bowl in that unit. This was resolved by quarter end.
Operating costs, including gold in process adjustments, were marginally lower
at A$59 million (R281 million; US$43 million) compared with the March quarter`s
A$60 million (R310 million; US$45 million). Total cash costs decreased from
A$442 per ounce (US$338 per ounce) to A$422 per ounce (US$304 per ounce),
reflecting the increase in gold production.
Operating profit from St Ives amounted to A$21 million (R99 million; US$15
million) compared to A$11 million (R58 million; US$9 million) achieved in the
March quarter, reflecting the increase in sales volumes and a 3 per cent
increase in received price to A$556 per ounce.
Capital expenditure for the June quarter amounted to A$75 million (R284 million;
US$48 million) compared with A$50 million (R239 million; US$39 million) in the
March quarter. The majority of this expenditure was incurred on the mill
optimisation project (see below for more detail) and expenditure at Mars pit to
bring it to full production.
St Ives completed the toll treatment programme according to plan at the end of
the June quarter. Consequently, gold production from this mine will be lower in
the September quarter, though not to the extent of the full tolling volumes.
The tolling program was undertaken in F2004 to augment cash flows and support
gold production given the ramp up in production from the new underground
sources and the uncertainties on the Junction mine. However, the cost of toll
treatment is more than twice that of treating ore through the new St Ives mill.
With that plant due for commissioning by the end of the December Quarter,
further tolling was considered imprudent from a value point of view. The
surface mining fleet, which had produced the majority of ore for toll treatment
will continue to operate at full capacity of 800,000 to 900,000 bcm`s per
month, with the stripping of the Mars and Pluton pits consuming the additional
mining capacity. Total cash costs should continue to improve incrementally in
the coming quarter with the ongoing improvement in the new underground mines.
The full benefits of the mill will only be seen in the middle of F2005.
AGNEW
June March
2004 2004
Gold produced - 000`ozs 52.7 52.8
Total cash costs - A$/oz 306 304
- US$/oz 221 233
Gold produced at Agnew for the quarter was constant at 52,700 ounces, contrary
to previous forecasts. These forecasts had assumed a significant reduction in
the volume of mining from the Crusader/Deliverer underground mine, This mine,
which mined 10,000 ounces in the quarter against 14,000 ounces in the March
quarter, remains in a scale down mode and operations are now largely focused
on remnant recovery which is difficult to predict. The Kim underground mine
performed exceptionally well, producing some 37,000 ounces, offsetting the
reduction at Crusader. The low grade stockpiles contributed a stable 10,000
ounces to the mill feed.
Operating costs, including gold in process charges, were unchanged at A$16
million (R79 million; US$12 million). Total cash costs increased marginally to
A$306 per ounce, while decreasing 5 per cent in US dollar terms to $221 per
ounce due to the weaker Australian dollar.
Agnew`s contribution to operating profit was A$13 million (R61 million; US$9
million), similar to the March quarter.
Capital expenditure increased to A$8 million (R24 million; US$4 million) from
A$7 million (R30 million; US$5 million) the previous quarter. Expenditure was
incurred on pre-production development at Main Lode underground and
metallurgical upgrades.
Gold production in the September quarter is expected to be lower than the June
quarter as production from the Crusader/Deliverer declines. Unit costs will be
affected accordingly.
Quarter ended 30 June 2004 compared
with quarter ended 30 June 2003
Attributable gold production was unchanged at 1,042,000 ounces in the June
2004 quarter compared with the June 2003 quarter. Slightly lower production at
the South African operations was offset by an increase at the international
operations.
Revenue decreased 3 per cent in rand terms (increased 13 per cent in US dollar
terms) from R2,971 million (US$383 million) to R2,869 million (US$434 million).
This was due to a reduction in the rand gold price achieved from R86,751 per
kilogram (US$349 per ounce) in the June 2003 quarter to R83,731 per kilogram
(US$395 per ounce) in the June 2004 quarter. Group operating costs in rand
terms increased by 6 per cent or R140 million (US$77 million) to R2,364 million
(US$357 million). At the South African operations operating costs increased by
only 5 per cent or R83 million (US$53 million) despite an effective 13 per cent
wage increase from 1 July 2003. The increase at the international operations
amounted to 9 per cent, from R654 million (US$83 million) to R711 million
(US$107 million). This increase resulted from increased volumes mined in
Australia and an increase in waste mined at Tarkwa to improve mining
flexibility.
Partially offsetting this is the effect of translating costs at Ghana into
South African rand at a 15 per cent stronger rand/US dollar exchange rate than
the corresponding quarter in the previous year. The average exchange rate
strengthened from R7.74 to the US dollar in the June 2003 quarter to R6.60 in
the current quarter. The effect of translating costs at the Australian
operations was small, with the average exchange rate strengthening from ZAR4.89
to ZAR4.75 rand to the Australian dollar in comparative periods.
Operating profit at R545 million (US$83 million) for the June 2004 quarter
compares to R717 million (US$100 million) for the June 2003 quarter as a result
of the above factors.
Loss before tax amounted to R279 million (US$38 million) compared with a pre-
tax profit of R968 million (US$124 million) in the June 2003 quarter. This
decrease was due to the lower operating profit described above as well as a
loss on financial instruments of R71 million (US$10 million) compared to a gain
in the June 2003 quarter of R311 million (US$35 million) and an exceptional
loss of R432 million (US$62 million) compared to an exceptional gain of R272
million (US$31 million) in the June 2003 quarter.
Earnings decreased from R789 million (US$98 million) in the June 2003 quarter
to a loss of R186 million (US$25 million) in the June 2004 quarter.
Year ended 30 June 2004 compared with year ended 30 June 2003
Attributable gold production decreased 4 per cent from 4,334,000 ounces to
4,158,000 ounces due to a reduction at the South African operations from
3,081,000 ounces to 2,804,000 ounces. Production at the international
operations increased by 8 per cent from 1,253,000 ounces to 1,354,000 ounces
year on year. The decline at the South African operations is due to lower grades
and the sale of St Helena. St Helena accounted for 43,700 of these ounces.
Gold output from Kloof and Driefontein decreased by 120,000 ounces and
105,000 ounces respectively. International operations performed well during the
period with Agnew having a spectacular year.
Revenue decreased by 15 per cent in rand terms (increased 11 per cent in US
dollar terms) from R13,893 million (US$1,532 million) to R11,773 million
(US$1,706 million). This was due to the decrease in production and a decrease
in the gold price, from R97,060 per kilogram (US$333 per ounce) to R85,905 per
kilogram (US$387 per ounce) for the year ended 30 June 2004.
Operating costs increased 3 per cent from R9,142 million (US$1,008 million) to
R9,411 million (US$1,364 million). However, due to the lower production, total
cash costs increased 9 per cent to R67,075 per kilogram from R61,766 per
kilogram in the prior period. The increase in operating costs at the South
African operations of 6 per cent was offset by the lower costs at the
International operations, as a result of translating the Ghanaian operations at
a 24 per cent stronger rand, which strengthened from an average of R9.07 to
R6.90 to the US dollar year on year. The 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 5.29 to 4.92 rand to
the Australian dollar.
Operating profit was R2,315 million (US$336 million), which decreased from
R4,741 million (US$523 million) for the year to 30 June 2003. Profit before tax
amounted to R978 million (US$142 million) down from R4,445 million (US$490
million) for the same period last year due to the lower operating profit
described above and the effect of the following items. Gains on financial
instruments of R129 million (US$19 million) decreased 72 per cent from R461
million (US$51 million) for the year to June 2003. Finance income of R29
million (US$4 million) decreased from R158 million (US$18 million) in the prior
period. The exceptional gains last year were R572 million (US$63 million)
compared with the current year`s loss of R176 million (US$26 million).
Net earnings were reduced from R2,953 million (US$326 million) to R768 million
(US$111 million) for the current year to 30 June 2004.
Capital and development projects
ST IVES EXPANSION PROJECT
All aspects of the St Ives new mill project progressed satisfactorily during
the quarter with the overall project schedule and budget remaining on target.
Of significant note during the quarter were the completion of all the large
civil foundations and the installation of the 36 foot diameter SAG mill.
Installation of the gearless drive and electrical motor components commenced in
July 2004.
Civil construction and earthworks are largely complete while leach tank and
thickener construction reached some 80 per cent in the quarter.
Equipment procurement is now complete with attention focussing on expediting
the ordered items. While delivery of the gyratory crusher remains on the
critical path, commissioning is still expected by the end of the second quarter
of F2005.
Capital expenditure and commitment on the project at the end of the June
quarter totalled A$65 million and A$95 million respectively against the overall
approved budget of A$125 million. Actual expenditure for the June quarter was
A$45 million.
TARKWA EXPANSION PROJECT
CIL Process Plant
During the quarter, this project continued to track ahead of schedule. In
particular, the new crusher was commissioned and brought on line to crush ore
for the north leach plant, while that plant`s crusher has been taken off line
for upgrading. Further, erection of the leach tanks was completed while the SAG
mill shell was assembled, and by quarter end was ready for drive and liner
installation. Other key focus areas included mechanical and piping installation
reaching some 66 per cent and 33 per cent respectively, and electrical and
instrumentation at some 28 per cent complete. The tailings storage facility
construction continues to advance satisfactorily with the majority of the
embankment at final height.
At this stage cold commissioning is expected during the September quarter and
mill commissioning on ore due in the December quarter. The project is still
forecast to completion within the Feasibility capital costs of US$85 million,
excluding some US$6 million of foreign exchange exposures on the Project. To
date US$78million has been spent.
Conversion to owner mining
A smooth transition from contract mining to owner mining took place on 25 June.
At this time all operating and support staff have been transferred from the
contractor to Tarkwa`s employment while 17 haul trucks, 5 excavators and 5
drill rigs have been brought into operation. The build up of the remaining
fleet will occur in the coming quarter. The contractor has been retained to
provide back- up mining volumes to Tarkwa`s new mining fleet during the
September quarter.
During the June quarter expenditure on this project more than doubled to US$36
million, and outstanding expenditure on this project is some US$17million, due
in the coming quarter. This project has been successfully executed, both within
bud
