| Thu 28 Oct 2004, 13:04 | | Results Quarter Ended 30 September 2004 |
|
Gold Fields Limited - Quarterly Results
Gold Fields Limited
Incorporated in the Republic of South Africa
Registration number 1968/004880/06
Share code: GFI
Issuer code: GOGOF
ISIN: ZAE000018123
Quarter Ended 30 September 2004
News Release Q1 F2005 Results - unaudited
South African operations continue to produce excellent results
under difficult conditions
Stock data
Number of shares in issue
- at 30 September 2004 491,714,615
- average for the quarter 491,604,675
Free Float 100%
ADR Ratio 1:1
Bloomberg / Reuters GFISJ / GFLJ.J
JSE Securities Exchange South Africa-(GFI)
Range - Quarter ZAR87.50 - ZAR55.09
Average Volume - Quarter 1,644,000 shares / day
NYSE - (GFI)
Range - Quarter US$13.65 - US$55.9
Average Volume - Quarter 1,100,000 shares / day
JOHANNESBURG. 28 October 2004 - Gold Fields Limited (NYSE & JSE: GFI) today
announced September 2004 quarter net earnings of R102 million (21 cents per
share) compared with a net loss of R186 million (39 cents per share) in the
June 2004 quarter and R421 million (89 cents per share) for the September
quarter of 2003. In US dollar terms the September 2004 quarter net earnings are
US$16 million (US$0.03 per share) compared with a loss of US$25 million
(US$0.05 per share) in the June 2004 quarter and US$57 million (US$0.12 per
share) for the September quarter of 2003:
September 2004 quarter salient features:
Attributable gold production on target at 1,007,000 ounces;
Costs well controlled with total cash costs up less than 1 per cent to
R66,516 per kilogram (US$325 per ounce);
Costs at South African operations quarter on quarter flat at
approximately R73,000 per kilogram, despite 7 per cent wage increase;
Operating profit of R456 million (US$72 million) achieved despite a lower
rand gold price and a small planned reduction in gold produced;
Growth projects on track with St Ives and Tarkwa expansion and
optimisation projects scheduled for completion before the end of 2004,
and work on Arctic Platinum Project in Finland and Cero Corona Project
in Peru is continuing;
Proposed combination of Gold Fields` international assets with IAMGold
to create Gold Fields International scheduled to be completed before the
end of the year.
Ian Cockerill,
Chief Executive Officer of Gold Fields said:
`In line with guidance provided for the quarter, Gold Fields delivered another
solid operational performance.
The strategic repositioning of the South African operations through Project
500, to cope with the strong local currency, continues to deliver the expected
results, reflecting the inherent quality and flexibility of these assets.
Particularly pleasing has been our ability to control costs, offsetting the 7
per cent wage increase implemented at these operations during the quarter. Our
initial target remains to reduce costs at the South African operations to
R70,000 per kilogram, and we are striving to achieve this.`
SA Rand
Quarter
Salient features
September June September
2003 2004 2004
Gold produced* 32,299 32,419 31,317 kg
Total cash costs 67,566 66,218 66,516 R/kg
Tons milled 11,497 11,076 11,043 000
Revenue 86,184 83,731 81,815 R/kg
Operating costs 204 213 212 R/ton
Operating profit 570 545 456 Rm
Net earnings 421 (186) 102 Rm
89 (39) 21 SA c.p.s.
Headline earnings 164 129 102 Rm
Net earnings excluding 35 26 21 SA c.p.s.
gains and losses on 136 102 (6) Rm
financial instruments and
foreign debt net of cash 29 21 (1) SA c.p.s.
and exceptional items
US Dollars
Quarter
September June September
2004 2004 2003
Gold produced* oz (000) 1,007 1,042 1,038
Total cash costs $/oz 325 312 282
Tons milled 000 11,043 11,076 11,497
Revenue $/oz 400 395 360
Operating costs $/ton 33 32 27
Operating profit $m 72 83 77
Net earnings $m 16 (25) 57
US c.p.s. 3 (5) 12
Headline earnings $m 16 20 22
US c.p.s. 3 4 5
Net earnings excluding $m (1) 16 18
gains and losses on
financial instruments and
foreign debt net of cash
and exceptional items US c.p.s. - 4 4
*Attributable - All companies wholly owned except for Ghana (71.1%).
Commentary
Health and Safety
During the quarter the fatal injury frequency rate improved by 50 per cent from
0.26 to 0.13, while the lost day injury frequency rate
regressed marginally from 11.9 to 12.5 and the serious injury
frequency rate from 5.9 to 6.7.
While the improvement in the fatal injury frequency rate is
commendable, the deterioration in the lost day and serious injury
frequency rates are a source of concern. Management attention is
focused on these metrics. The Du Pont Health and Safety Review
was completed during the quarter and a report submitted to
management. The recommendations from this report are being
reviewed for implementation.
The annual safety awards for F2004 were presented during this
quarter with Beatrix walking off with the highest honours in the Group.
Beatrix continued its sterling performance into Q1 F2004 by achieving
2 million fatality free shifts for the whole mine during June and again,
for 1, 2 and 3 shafts, during September. During the quarter Damang
also achieved 2 million fatality-free shifts and Driefontein achieved 1
million fatality free shifts.
Financial Review
Quarter ended 30 September 2004
compared with quarter ended
30 Jun e 2 004
Revenue
As planned, attributable gold production decreased by 3 per cent to 1,007
million ounces for the September 2004 quarter, compared with 1,042 million
ounces in the June 2004 quarter. The contribution of the South African
operations was unchanged at 700,000 ounces while that of the international
operations was down by 10 per cent to 307,000 ounces. This was in line with the
expected lower production at Damang, St Ives and Agnew.
Combined with a 2 per cent decline in the gold price received, this resulted in
revenue reducing by 6 per cent to R2,705 million (US$425 million) from R2,869
million (US$434 million) the previous quarter.
The higher US dollar gold price achieved for the September quarter, (US$400 per
ounce, compared with US$395 per ounce in the June quarter) was offset by the
strengthening of the rand against the US dollar from an average of R6.60 to
R6.36 quarter on quarter. As a result the rand gold price decreased from
R83,731 per kilogram in the June quarter to R81,815 per kilogram in the
September quarter.
Operating costs
Operating costs for the September quarter, at R2,336 million (US$367 million)
were 1 per cent below the June quarter`s R2,364 million (US$357 million). This
was achieved through the introduction of more rigorous cost reduction measures
inherent in Project 100, as well as benefits starting to flow through from the
new supply chain management initiative introduced across the Group as part of
the Shared Services initiative.
Costs at the South African operations increased by less than 1 per cent despite
the 7 per cent wage increase implemented on 1 July 2004, as well as normal
inflationary pressures such as increased steel and oil prices. Steel prices have
increased by 70 per cent in the last 6 months.
At the international operations costs of R672 million were 5 per cent lower
than the R711 million reported in the June quarter. In the domestic currencies
these costs were flat with Ghana reporting costs of US$50 million and Australia
A$80 million.
The gold inventory change resulted in a credit of R87 million (US$14 million)
to costs, which was more than double that of the previous quarter. This was due
to growth in gold in process on the Tarkwa leach pads and the build-up of
stockpiles at St. Ives and Tarkwa, aimed at providing feedstock for the
commissioning of the new mills at both of these operations during the December
quarter.
Operating profit margin
The net effect of the lower revenue and lower costs, after taking account of
gold in process movements, was an operating profit of R456 million (US$72
million). This is 16 per cent lower than the R545 million (US$83 million)
achieved in the June quarter. The Group margin decreased to 17 per cent from 19
per cent in the June quarter, while the South African margin decreased from 9
per cent to 7 per cent. This reduction in margin was virtually all due to the
lower rand gold price received. The margin at the international operations was
unchanged at 36 per cent.
Amortisation
Amortisation of R371 million (US$58 million) for the September quarter is 12
per cent higher than the June quarter`s R332 million (US$50 million). This
increase was due to increased mining volumes at the international operations,
mainly at St. Ives to build up a stockpile for the new mill, together with
amortisation of the new mining fleet at Tarkwa. Amortisation at St Ives is
based on ounces mined not ounces produced.
Amortisation at the South African operations increased by R19 million (US$3
million) or 13 per cent mainly due to the impact of a reclassification of
reserves at Kloof. These reserves, previously planned to be mined through a
decline from 7 shaft, will now be mined from the 4 shaft current infrastructure
above 45 level. Differences in cost structure and timing of the mining of these
reserves, has increased the amortisation charge.
Other income
Net interest and investment income of R16 million (US$3 million) decreased from
R28 million (US$4 million) in the June quarter. This resulted from the lower
cash balances held, compounded by lower interest rates received.
Gains on foreign debt and cash amounted to R16 million (US$3 million). This
compares to R76 million (US$11 million) in the June quarter which included 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.
During the quarter under review the strengthening of the euro against the US
dollar, from 1.2175 to 1.2308, resulted in a gain of R16 million (US$3
million). We currently have euro 164 million in an offshore account, arising
from the capital raising undertaken in November 2003.
The gain on financial instruments of R152 million (US$24 million) included a
marked to market gain on an interest rate swap of R147 million (US$23 million);
a gain on the Tarkwa rand/US dollar financial instruments of R2 million; and a
R3 million gain on the Australian dollar/US dollar call options.
The interest rate swap was established in relation to the loan from Mvela Gold,
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. This strategy is yielding positive results with a R14
million cash benefit for the September quarter and a cumulative R31 million
cash benefit to date.
A further R22 million cash benefit has been locked in for the three- month
period to December 2004. More details on these financial instruments are given
on page 11 of this report.
Other expenses, which were R31 million (US$4 million) in the previous quarter
reduced to R5 million (US$1 million) in the September quarter. This change was
mainly due to optimising stores consumption and procurement practices in the
Group and restructuring costs at Shared Services incurred in the June quarter.
Exploration expenditure decreased from R62 million to R55 million in the
September quarter. This was due to the stronger rand, as in US dollar terms
expenditure was unchanged at US$9 million. This level of expenditure is set to
continue over the coming quarter.
For the September quarter there were no exceptional items. The exceptional loss
last quarter of R432 million (US$62 million) was primarily as a result of the
impairment at Beatrix 4 shaft (formerly Oryx) of R426 million (US$62 million).
Taxation
A taxation charge of R86 million (US$14 million) in the September quarter
compared with a credit of R124 million (US$18 million) realised in the June
quarter. This variance is mainly due to the deferred tax credit last quarter of
R111 million (US$17 million) on the impairment at Beatrix 4 shaft and a tax
credit of R26 million on the loss on financial instruments, compared with a
charge this quarter of R59 million. Damang provided for normal tax for the
first time of R8 million (US$1 million), having fully utilised its remaining
capital allowances during the quarter.
Earnings
After accounting for minority interests, earnings amounted to R102 million
(US$16 million) or 21 SA cents per share (US$0.03 per share), compared with a
loss of R186 million (US$25 million) or negative 39 SA cents per share (US$0.05
per share negative) 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 R102 million (US$16
million) or 21 SA cents per share (US$0.03 per share) compared with R129
million (US$20 million) or 26 SA cents per share (US$0.04 per share) last
quarter. The main reason for this decrease was the reduced net operating profit
partly offset by the gain on the Mvela interest rate swap.
Loss/earnings, excluding exceptional items as well as net gains on financial
instruments and foreign debt net of cash after taxation, amounted to a loss of
R6 million (US$1 million negative) or negative 1 SA cents per share (US$0.00
per share) compared with earnings of R102 million (US$16 million) or 21 SA
cents per share (US$0.04 per share) achieved last quarter.
Cash flow
Cash flow from operating activities for the quarter was R198 million (US$31
million), compared with operating cash flow in the June quarter of R436 million
(US$66 million). The decrease largely reflects the decline in revenue.
A dividend of R197 million (US$29 million) was paid to ordinary shareholders
and R64 million (US$10 million) to minority shareholders. No dividend was paid
in the June quarter.
Capital expenditure was R755 million (US$119 million) compared with R938
million (US$139 million) in the June quarter. The decrease is mainly due to the
completion of the owner mining project in Tarkwa, where capital expenditure
halved to R194 million (US$31 million). At the South African operations capital
reduced by R37 million (US$10 million) to R148 million (US$23 million) largely
due to timing. A significant portion of this expenditure was directed at the
major projects with R20 million at 1 tertiary and 5 shaft at Driefontein, R37
million at Kloof 4 shaft and R41 million at Beatrix 3 shaft. The Australian
operations incurred capital expenditure of R370 million (A$82 million). The
mill project at St. Ives accounted for R186 million (A$41 million) of this
expenditure as compared to R224 million (A$45 million) in the June quarter. The
balance on this project, the majority of which will be spent during the
December quarter, amounts to A$19 million. At the Ghanaian operations, capital
expenditure amounted to R204 million (US$32 million). R165 million (US$26
million) was spent on the new mill and on the project to convert from contract
mining to owner mining. This compares with R361 million (US$58 million) in the
previous quarter. The balance on these projects, which will be spent in the
December quarter, amounts to US$10 million. Major projects are still forecast
to be in line with approved votes except for US$4 million over expenditure on
the mill project at Tarkwa, and a further US$6 million depending on currency
moves over the next quarter.
Net cash outflow for the quarter was R795 million (US$124 million).
The cash balance at the end of the June quarter was R4,135 million (US$656
million) which has declined to R3,409 million (US$524 million) at the end of
September.
Detailed and Operational Review
Group overview
Attributable gold production for the September 2004 quarter decreased 3 per
cent to 1,007,000 ounces when compared with the June quarter. Attributable
production from the South African operations was unchanged at 700,000 ounces,
which is slightly more than two thirds of the Group`s total attributable
production.
At the South African operations, the decrease at Driefontein of 6,800 ounces
was offset by increased production at Kloof. Production at Beatrix was flat
quarter on quarter. The decrease at Driefontein was due to lower underground
grades and lower surface tonnage.
Operating profit at the South African operations decreased from R163 million
(US$25 million) to R120 million (US$19 million), mainly as a consequence of the
lower rand gold price.
Production from the Australian operations decreased 14 per cent to 168,900
ounces this quarter because of the planned lower volumes at Agnew and the
scheduled termination of toll milling at St. Ives.
Operating profit from the Australian operations decreased quarter on quarter by
10 per cent in rand terms to R143 million (A$32 million, US$22 million: both
virtually unchanged from last quarter), primarily as a result of the decreased
production at Agnew and the weaker US dollar. The Ghanaian operations showed a
6 per cent decrease in attributable gold production to 137,800 ounces as there
was a reduction of high grade ore from Damang pit, as forecast. Tarkwa
increased gold production marginally but did not meet the increased forecast.
This was due to the increase in gold in process on the leach pads, although
mining and stacking operations performed well.
Ghana contributed operating profit of R193 million (US$30 million), a 14 per
cent decrease on the previous quarter`s operating profit, in line with the
decrease in gold production.
Group ore milled decreased from 11.08 million tons to 11.04 million tons as
surface tons reduced at all operations except Tarkwa during the quarter. The
overall yield decreased from 3.1 grams per ton in the June quarter to 3.0 grams
per ton in the current quarter. Total cash costs in rand terms were virtually
unchanged at R66,516 per kilogram.
In US dollar terms, total cash costs increased 4 per cent to US$325 per ounce,
compared with US$312 per ounce last quarter, mainly due to the stronger rand.
Operating cost per ton at R212 was virtually unchanged when compared to last
quarter.
The international operations contributed R336 million (US$53 million) of the
total operating profit of R456 million (US$67 million) or 74 per cent. This
compares with R383 million (US$58 million) of the total operating profit of
R545 million (US$83 million) or 70 per cent last quarter.
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. As previously reported 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
100 and Project 400.
Project 100, focused mainly on introducing improved standards and norms,
thereby improving control over the consumption of materials, together with
engineering benchmarking. The project targets annualised savings of R100
million. By the end of September, benefits of R52 million were recorded,
compared with R41 million planned.
Project Beyond was launched on the South African operations during May and aims
to reduce stores and service expenditure by between R200 and R300 million per
annum over the next three years. Savings are derived from the application of
best practice procurement techniques to Gold Fields` annual procurement spend
for the South African operations, of around R3 billion. Contract price
reductions of around R100 million are targeted for this year, of which
approximately 50 per cent will flow as actual cost reductions in the period. A
major, and highly successful, component of the procurement strategy involves
the use of electronic auctions. Savings of over R20 million against the current
cost base have accrued, mainly from two auction events - for conveyer belting
and grinding media - together with negotiated reductions in the price of
cyanide. Similar events are planned for engineering repairs, roof support,
foodstuffs, explosives, fuels and lubricants and underground services in the
months ahead.
These strategies produce significant cost savings without any sacrifice of
quality or increase in supply risk. Similar projects for the Australian and
Ghanaian operations are being planned. Indications are that cost savings of
between R200 to R300 million could be achieved in these regions.
Since adopting a shared services model early last year Gold Fields has reduced
stores inventory by around 30 per cent through the introduction of new
operating practices together with rationalisation of vendors and
standardisation of materials. This resulted in a Gold Logistics Achievement
Award for Gold Fields from the logistics industry.
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.
This strategy has started to deliver results.
Underground grades have moved closer to life of mine averages and surface
tonnage at all South African operations has been reduced, replaced
by underground tonnage.
Paylimits are also in line with project parameters. Gold Fields continues to
prudently manage its ore reserves and is not high grading as the table below
clearly shows.
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.
Progress on project 400
Quarter ended Sep Dec Mar Jun Sep
2003 2003 2004 2004 2004
Driefontein:
Life of mine head grade as per
the 2003 and 2004 annual report 8.7 8.7 8.7 8.7 8.1
Life of mine head grade adjusted
for estimated metallurgical
8.4 8.4 8.4 8.4 7.8
recoveries
Project 400 - call - - - - 8.0
Driefontein (underground yields
achieved) 8.1 7.5 8.6 8.5 8.1
Kloof:
Life of mine head grade as per
the 2003 and 2004 annual report 9.8 9.8 9.8 9.8 10.5
Life of mine head grade adjusted
for estimated metallurgical
9.5 9.5 9.5 9.5 10.2
recoveries
Project 400 - call - - - - 9.0
Kloof (underground yields
achieved)
8.1 8.6 10.0 9.5 9.1
Beatrix:
Life of mine head grade as per
the 2003 and 2004 annual report 5.1 5.1 5.1 5.1 5.5
Life of mine head grade adjusted
for estimated metallurgical
4.9 4.9 4.9 4.9 5.3
recoveries
Project 400 - call - - - - 4.8
Beatrix (underground yields
achieved) 4.4 4.7 4.5 4.7 4.4
Progress on Project 500
The cost savings targeted above have largely been achieved and have contributed
towards the offsetting of the 7 per cent wage increase during the quarter. Our
thrust remains on producing quality volume and, while significant progress has
been made since September 2003 when we switched to the SAKS 5th avenue strategy
as shown in the table , there is still upside in improving the underground
grades to match the life of mine head grades at Kloof and Beatrix.
Driefontein is mining to its life of mine grade.
A full explanation of project 500 can also be found on the Gold Fields website
- www.goldfields.co.za
R78,000 per kilogram plan
As a result of the decrease in the rand gold price to below R80,000 per
kilogram during the quarter a new mining plan was drawn up at a gold price of
R78,000 per kilogram. Due to the gold price and exchange rate uncertainty which
exists, this plan, which includes capital reassessment, sourcing higher grade
material to replace surface material, contractor reduction and mine
restructuring amongst others, has been implemented in conjunction with project
500.
General
The South African operations have, over the past 4 years 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.
During the quarter additional shifts were worked-in so that stockpiles could be
built up to ensure continuous milling over the Christmas period. This proved
successful, and over 50,000 tons were stockpiled at the South African
operations during the quarter.
Driefontein
September June
2004 2004
Gold produced - 000`ozs 283.5 290.3
Yield - underground - g/t 8.1 8.5
- combined - g/t 5.7 5.6
Total cash costs - R/kg 67,419 67,372
- US$/oz 330 317
Production at Driefontein decreased 2 per cent to 283,500 ounces from 290,300
ounces in the June quarter. This reduction was attributable to a lower
underground yield and a 15 per cent decline in surface tonnage treated. The
yield from underground reduced from
8.5 grams per ton last quarter to 8.1 grams per ton in the September quarter.
The lower yield resulted from a move towards the project 400 call rate of
8.0 grams per ton and was also influenced by an increase in seismicity at
the higher grade 5 shaft and 6 shaft complexes. Total tons milled decreased
5 per cent to 1.54 million tons in line with the lower milling days this
quarter. Tons milled from underground increased 2 per cent to 950,000 tons.
The increased underground tons replaced surface tonnage and together with
less milling days resulted in a decrease in surface tonnage from 695,000
tons last quarter to 594,000 tons in the September quarter. The lower
surface tonnage to underground tonnage ratio led to an improved combined
yield from 5.6 grams per ton to 5.7 grams per ton for the quarter.
Total cash costs were virtually unchanged in Rand terms at R67,419 per
kilogram. This was despite the lower gold production and the implementation of
the annual wage increase. In US dollar terms the total cash costs increased by
4 per cent from US$317 per ounce to US$330 per ounce quarter on quarter due to
differences in the rand/dollar exchange rate. Operating profit declined by 17
per cent to R99 million (US$16 million) in the current quarter. The two main
contributors were a 3 per cent drop in the rand gold price and a 2 per cent
decline in gold production. The lower rand gold price and reduced earnings
advocate the constant reassessment, as well as the re-scheduling, of
non-crucial capital items. Therefore, capital expenditure decreased to R31
million (US$5 million) for the quarter compared to R40 million (US$7 million)
in the previous quarter.
Gold output for the December quarter is expected to be similar to the September
quarter. Seismicity at number 5 shaft complex is still a concern. However, the
completion of the refrigeration plant, scheduled for the end of December 2004,
will improve the overall
ventilation at number 5 shaft complex and will enable face length to be
increased with the accompanying enhanced flexibility.
Kloof
September June
2004 2004
Gold produced - 000`ozs 266.6 259.2
Yield - underground - g/t 9.1 9.5
- combined - g/t 6.6 6.6
Total cash costs - R/kg 73,484 74,191
- US$/oz 359 350
Gold production at Kloof increased 3 per cent to 266,600 ounces in the
September quarter. This was due to increased mining volumes from underground
sources in the September quarter compared to the previous quarter. Underground
tonnage increased 9 per cent to 890,000 tons this quarter from 818,000 tons,
while surface tons decreased from 407,000 tons to 369,000 tons as a result of
the increased underground volumes. The underground yield decreased from 9.5
grams per ton last quarter to 9.1 grams per ton this quarter, with the combined
yield constant at 6.6 grams per ton. The lower underground yield is in line
with the project 400 call rate.
Operating costs at R636 million (US$100 million) for the quarter increased by 2
per cent when compared to the previous quarter`s costs of R621 million (US$94
million). This was mainly as a result of the increased underground production
and annual wage increases.
Total cash costs at R73,484 per kilogram were 1 per cent below the previous
quarter`s R74,191 per kilogram. In US dollar terms, cash costs increased from
US$350 per ounce to US$359 per ounce quarter on quarter, due to the stronger
rand. Operating profit decreased from R49 million (US$7 million) the previous
quarter to R42 million (US$7 million) this quarter. Main factors were the lower
gold price received and increased operating costs. Capital expenditure
decreased from R76 million (US$14 million) to R59 million (US$9 million) this
quarter, as capital expenditure in the current environment is constantly re-
assessed.
The outlook for the December quarter is a further increase in gold production
to above 270,000 ounces, while entrenching the R78,000 per kilogram plan.
Beatrix
September June
2004 2004
Gold produced - 000`ozs 150.1 150.2
Yield - underground - g/t 4.4 4.7
- combined - g/t 4.0 3.8
Total cash costs - R/kg 83,912 81,978
- US$/oz 410 386
Gold production at Beatrix was constant quarter on quarter at 150,100 ounces.
Underground ore volumes increased by 6 per cent from 968,000 tons in the June
quarter to 1,029,000 tons in the September quarter. The combined yield
increased by 5 per cent quarter on quarter from 3.8 grams per ton to 4.0 grams
per ton. This increase in yield was partially due to reduced surface tonnages,
which reduced from 254,000 tons in the June quarter to 147,000 tons in the
September quarter, as toll milling was terminated by Harmony at the Joel plant
at the end of July. Surface yields increased from 0.6 grams per ton to 0.8
grams per ton quarter on quarter. Underground yields decreased from 4.7 grams
per ton in the June quarter to 4.4 grams per ton in the September quarter. At
the Beatrix 1-3 shaft operation underground yields were maintained. At 4 shaft
where the underground yield decreased from 6.2 grams per ton to 5.6 grams per
ton. The reduction in grade at the 4 shaft operation was primarily due to the
inability to clean and tram broken rock from a number of high-grade stopes
during the quarter. The restriction to tram from these stopes was due to
rehabilitation of a number of access tunnels due to poor ground conditions and
track upgrades being done on the main 4 shaft tramming levels, in preparation
for the zone 5 mining.
The overall Beatrix mine call factor (MCF) was below plan. Efforts to restore
the MCF to planned levels continue through improved fragmentation, sweepings
and water reduction. As part of ongoing rationalisation, the Beatrix 1-3 shaft
operation has been restructured into a North and South to improve logistics,
eliminate duplication, and improve focus and accountability, whist reducing
overheads. The North consists of the new 3 shaft complex and 3 sections (below
16 level) from 1 shaft, which are in close proximity to 3 shaft. The South
section consists of 2 shaft and the remaining sections from 1 shaft above 16
level. Number 4 shaft (formerly Oryx) has been included as the third operating
section. Management at Beatrix has now been centralised, eliminating
duplication of various structures and overheads which existed due to the duel
management structure at Beatrix and Oryx.
Operating costs increased 3 per cent to R406 million (US$64 million) due to
restructuring costs and the annual wage increase. Total cash costs increased
similarly to R83,912 per kilogram (US$410 per ounce) from R81,978 per kilogram
(US$386 per ounce) quarter on quarter.
At the operating level, a loss of R20 million (US$3 million) resulted from the
above factors and the previously discussed lower gold price, as compared to a
R7 million (US$1 million) loss in the June quarter.
Capital expenditure decreased by 15 per cent to R59 million (US$9 million) from
R69 million (US$12 million) in the June quarter. The majority of this
expenditure was at 3 shaft. The stoping and development build-up at 3 shaft is
progressing well and in line with expectations.
Gold production is expected to increase slightly in the December
quarter with a similar improvement expected in the working cost.
South African Operations
In conclusion, production at the South African operations will be higher in the
December quarter when compared with the September quarter.
International operations
Ghana
Tarkwa
September June
2004 2004
Gold produced - 000`ozs 124.8 123.1
Total cash costs - US$/oz 248 251
Gold production for the September quarter increased by 1,700 ounces to 124,800
ounces for the Tarkwa operation. This was not in line with the guidance
provided in the June quarter and was a disappointing result as mining and
crushing operations performed very well. Ore tons mined was stable at 4.26
million, while total tons mined increased to 20.8 million from 18.5 million in
the June quarter, reflecting a planned increase in stripping ratio to 3.87.
Tons treated through the crushing and leaching plant increased 5 per cent to
4.1 million tons and recoverable gold stacked increased by a similar margin to
137,000 ounces. This occurred despite a planned decrease in head grade to the
heap leach plant from 1.44 grams per ton to 1.33 grams per ton, which was
offset by an increase in the expected dissolution of the ores.
The decrease in head grade treated reflects a planned move to lower grades in
the open pits, which are now being planned at a US$350 per ounce gold price,
and also the stockpiling of high grades ores ahead of the new CIL plant.
Gold in process increased by some 13,000 ounces during the quarter
- with 10,000 ounces of this occurring on the south leach pads. This
increase is due to:
a move to higher lifts on both the north and south pads;
the stacking of some high clay ores in the south, the presence of which
have previously been associated with significant GIP increases; and
the configuration of the new leach pads in the south which are valley fill
style versus the traditional flat base bed design. The valley fill tends to
have fewer solution offtake points than the other design and can increase
solution hold-up volumes.
A very smooth transition from contract mining to owner mining took place during
the quarter, with the contractor withdrawing most of its mining equipment in
July and the remainder at the end of August.
The performance of the owner mining fleet is in line with expectations.
Operating costs at US$31 million including gold in process
adjustments, were the same as the previous quarter despite the 2.3
million ton increase in total mining volumes. Operating costs per ton
treated were US$8.36 per ton against US$8.63 per ton in the June
quarter. This reflects the reduction in mining costs as a result of the
conversion to owner mining. Total cash costs decreased slightly to
US$248 per ounce for the quarter reflecting the increase in gold
production and lower unit operating costs, but does not yet reflect the
full benefit from owner mining, as parts of the contract fleet operated
for much of this quarter and some transition costs were experienced.
The net result was a slight increase in operating profit from US$18
million in the previous quarter to US$19 million in the current quarter.
Capital expenditure decreased from US$65 million in the previous
quarter to US$30 million in the September quarter as a result of the
majority of the mining fleet being paid for in previous quarters and the
construction work on the CIL plant nearing completion.
Gold production is expected to increase in the December quarter as a result of
the commissioning of the CIL plant. The gold produced from
the heap leach operation is expected to increase slightly from the
September levels, subject to gold in process movements, which
remain difficult to predict. Total cash costs are expected to decline in
the December quarter as the full benefit of owner mining are
experienced but will be offset to a degree by the costs of the commissioning
of the CIL.
Damang
September June
2004 2004
Gold produced - 000`ozs 69.1 82.5
Total cash costs - US$/oz 238 205
Gold production for the quarter declined from 82,500 ounces to 69,100 ounces as
predicted. This reflects a decrease of 4 per cent in mill throughput to 1.34
million tons due to a mill shut down, as well as a 14 per cent decline in head
grade from 2.1 grams per ton to 1.8 grams per ton. The head grade decline
reflects the ongoing decline in the availability of high grade ores from the
mature Damang pit. Total tons mined decreased by 25 per cent to 2.7 million
tons, with the stripping ratio reducing from 1.71 to 1.18.
Operating costs decreased from US$17 million to US$15 million, reflecting the
lower production levels and as a result cost per ton milled decreased from
US$12.24 to US$11.33 per ton quarter on quarter. Total cash costs increased
from US$205 to US$238, a function of the reduced gold production and also
reflects a US$892,000 GIP charge (June US$473,000 credit) reflecting
consumption of high grade stockpiles. Operating profit reduced from US$16
million to US$11 million in the September quarter in line with the lower gold
production.
Capital expenditure incurred during the quarter was US$2 million, mainly on the
exploration project aimed at extending the life of the Damang pit.
Gold production is expected to be slightly lower again in the December quarter
with the expected reduction in high grade sources of ore from the Damang pit.
There will be a concomitant effect on unit costs.
Australia
St Ives
September June
2004 2004
Gold produced - 000`ozs 123.2 143.6
Total cash costs - A$/oz 420 422
- US$/oz 297 304
Gold production for the quarter decreased 14 per cent to 123,200 ounces when
compared to 143,600 ounces produced in the June quarter. The reduction was
entirely due to the scheduled cessation of the toll treatment campaign, which
ended on 30 June, which had contributed some 28,000 ounces in that period.
Total mining operations produced some 1.76 million tons of ore and total
treatment was only 1.35 million tons, reflecting the planned stock piling of
ores ahead of the new CIP plant, which is due to be commissioned in the
December quarter.
During the quarter, open pit mining operations performed well, mining a total
of 7.7 million tons of ore and waste at an average strip ratio of
6.4 (June: 6.7). The underground operations also performed to expectation with
the ramp-up of the new Argo and East Repulse mines continuing such that ore
production from total underground sources increased 10 per cent to some
572,000 tons compared to the June quarter.
Total cash costs, which include gold in process inventory adjustments,
decreased marginally from A$422 per ounce (US$304 per ounce) to A$420 per ounce
(US$297 per ounce). This was as a result of the cessation of the more expensive
toll treatment programme and improvement in the cost performance of the new
underground mines.
Operating profit at St. Ives of A$22 million (R98 million) increased marginally
when compared with the A$21 million (R99 million) of the June quarter,
reflecting the increase in the realised price of gold from A$556 in the June
quarter to A$563 in the September quarter, together with the slight reduction
in unit costs.
Capital expenditure for the September quarter amounted to A$73 million (R330
million) compared with A$75 million (R284 million) in the June quarter. The
majority of this expenditure was incurred on the mill optimisation project (see
St Ives Expansion Project for more detail), and continuing expenditure at Mars
open pit on stripping, together with development works at East Repulse and Argo
underground mines.
With commissioning of the new mill scheduled for late December, no significant
impact on production is forecast until the March quarter.
Production for the December quarter is therefore expected to equal or only
slightly exceed that of the current quarter, with cash costs continuing to
improve slowly.
Agnew
September June
2004 2004
Gold produced - 000`ozs 45.7 52.7
Total cash costs - A$/oz 338 306
- US$/oz 239 221
Gold produced at Agnew decreased from 52,700 ounces in the June quarter to
45,700 ounces in the September quarter, in line with previous forecasts. The
decrease resulted from a 5 per cent drop in mill tonnage, together with an 8
per cent drop in average feed grade to the mill. The throughput decrease
resulted from a planned shutdown, together with the current programme to
rehabilitate the adsorption tanks. Grade from Crusader/Deliverer remnant mining
is reducing as the mine approaches completion and gold produced decreased to
some 7,000 ounces in the September quarter compared with 10,000 ounces in the
June quarter. While mined volumes from the Kim underground mine increased
slightly, gold production fell from 37,000 ounces in the June quarter to 35,000
ounces in the September quarter, recognising the extraordinary grades seen in
that period. The low grade stockpiles contributed a further 6,000 ounces to
mill feed.
Total cash costs, which includes gold in process inventory adjustments, rose
from A$306 per ounce (US$221 per ounce) in the June quarter to A$338 per ounce
(US$239 per ounce) in the September quarter, in line with the lower production.
Unit operating costs remained under good control.
Agnew`s operating profit was A$10 million (R44 million), down from A$13 million
(R61 million) in the June quarter, in line with the reduction in gold volumes.
Capital expenditure increased to A$9 million (R40 million) from A$8 million
(R24 million) the previous quarter. The main areas of expenditure included
development at Kim underground (A$4 million), development of the new Main Lode
access (A$1 million), rehabilitation of the adsorption tanks at the mill (A$1
million) and prestrip of the new Songvang open pit (A$1 million).
Gold production is forecast to increase slightly for the December quarter as a
result of higher grades from the Kim underground mine, continued production
from Crusader underground to at least mid- November and the start of the ore
stream from the new Songvang open pit mine. Cash costs should remain stable.
Quarter ended 30 September 2004
compared with quarter ended
30 September 2003
Attributable gold production was 3 per cent lower at 1,007,000 ounces in the
September 2004 quarter compared with 1,038,000 ounces in the September 2003
quarter. Production at the South African operations at 700,000 ounces was 1 per
cent below the 711,000 ounces produced in the September 2003 quarter. At the
international operations, gold production decreased 6 per cent mainly due to
lower recoveries at Tarkwa.
Revenue decreased 8 per cent in rand terms (increased 7 per cent in US dollar
terms) from R2,952 million (US$397 million) to R2,705 million (US$425 million).
This was due to the lower gold production and a reduction in the rand gold
price achieved fromR86,184 per kilogram (US$360 per ounce) in the September
2003 quarter to R81,815 per kilogram (US$400 per ounce) in the September 2004
quarter. Group operating costs in rand terms decreased marginally to R2,336
million (US$367 million). At the South African operations operating costs were
over 1 per cent below the September 2003 quarter at R1,664 million (US$262
million), an excellent performance considering gold production was similar and
taking into account the above average wage increases, as well as normal
inflationary increases seen over the past year. The increase at the
international operations amounted to 2 per cent, from R656 million (US$88
million) to R672 million (US$106 million). However, if gold in process changes
are taken into account, as well as the stronger rand, costs in US dollars were
virtually unchanged at US$92 million. The average rand/dollar exchange rate
strengthened from R7.44 in the September 2003 quarter to R6.36 in the current
quarter, a 15 per cent change.
The effect of translating costs at the Australian operations was less at 8 per
cent, with the average exchange rate strengthening from R4.89 to R4.50 in the
September quarter.
Operating profit at R456 million (US$72 million) for the September 2004 quarter
compares to R570 million (US$77 million) for the September 2003 quarter.
Profit before tax amounted to R210 million (US$33 million) compared with R491
million (US$66 million) in the September 2003 quarter.
This decrease was due to the lower operating profit described above as well as
a R72 million increase in amortisation. This was partly offset by an increase
on gains in financial instruments and an exceptional profit last year from the
sale of mineral rights and investments.
Earnings decreased from R421 million (US$57 million) in the September 2003
quarter to R102 million (US$16 million) in the September 2004 quarter.
Capital and de velopme n t
projects
St Ives expansion project
The overall construction schedule for the St Ives new mill project remained on
target. By the quarter end, all major mechanical packages (mainly equipment,
piping, and steelwork) had been installed and were being closely followed by
the HV switch room network, and associated cabling. The 36 ft. diameter single
stage SAG mill and the associated gearless drive motor (GMD) had reached 90 per
cent and 82 per cent completion respectively by the end of September. The
132KV. main power supply to the new mill 20MVA transformer was connected on
September 5, coinciding with a planned old mill shut down.
Commissioning procedures are well advanced, and initial commissioning of the
crusher and reclaim circuit will commence in late October followed by the
remainder of the plant through November- December.
Cumulative capital expenditure and commitments as at the end of the September
quarter totalled A$106 million and A$116 million respectively. The overall
project is expected to be completed within the approved budget of A$125 million
and on track for commissioning in the December quarter.
Tarkwa expansion project
CIL Process Plant
During the quarter, this project continued to track ahead of schedule.
The single stage semi-autogenous (SAG) mill was cold commissioned with ore
being introduced at the end of the quarter. The mill was successfully
commissioned in the first week of October, with the commissioning of the
desorption facility and gold room expected during the middle of the quarter -
when the first gold pour will occur.
Currently the CIL p
