| Mon 31 Jan 2005, 8:23 | | QUARTER ENDED 31 DECEMBER 2004 NEWS RELEASE Q2 F05 |
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GOLD FIELDS LIMITED - QUARTER ENDED 31 DECEMBER 2004 NEWS RELEASE Q2 F2005
RESULTS - UNAUDITED
GOLD FIELDS LIMITED
Incorporated in the Republic of South Africa
Registration number 1968/004880/06
Share code: GFL
Issuer code: GOGOF
ISIN - ZAE 000014270
QUARTER ENDED 31 DECEMBER 2004
NEWS RELEASE Q2 F2005 RESULTS - UNAUDITED
Attributable gold production up 4% and operating profit up 40%
Stock data
Number of shares in issue
- at end December 2004 492,025,801
- average for the quarter 491,907,010
Free Float 100%
ADR Ratio 1:1
Bloomberg / Reuters GFISJ / GFLJ.J
JSE Securities Exchange South Africa-(GFI)
Range - Quarter ZAR69.10 - ZAR94.02
Average Volume - Quarter 1,827,766 shares / day
NYSE - (GFI)
Range - Quarter US$12.27 - US$15.24
Average Volume - Quarter 1,765,881 shares / day
JOHANNESBURG. 31 January 2005 - Gold Fields Limited (NYSE & JSE: GFI) today
announced December 2004 quarter operating profit of R637 million compared with
R456 million in the September 2004 quarter and R545 million for the December
quarter of 2003. In US dollar terms the December 2004 quarter operating profit
was US$103 million compared with US$72 million in the September 2004 quarter
and US$80 million for the December quarter of 2003. Net earnings excluding
gains and losses on financial instruments and foreign debt net of cash and
exceptional items was R101 million, significantly up on the previous quarter:
December 2004 quarter salient features:
Attributable gold production increased 4 per cent to 1,048,000 ounces,
with Tarkwa increasing by 34 per cent;
Costs were again well controlled, with total cash costs down over 2 per
cent to R64,921 per kilogram (US$330 per ounce);
Costs at the South African operations were down 2 per cent to R71,949
per kilogram;
Operating profit of R637 million (US$103 million) achieved, 40 per cent
higher than last quarter and 86 per cent higher at the South African
operations;
St Ives and Tarkwa mills were commissioned during the quarter and work
on Arctic Platinum Project in Finland and Cerro Corona Project in Peru
is continuing;
Ian Cockerill,
Chief Executive Officer of Gold Fields said:
`Despite the distraction of Harmony`s hostile bid Gold Fields again delivered a
solid operational performance, consistent with guidance provided for the second
quarter.
As forecast, operating profit for the December 2004 quarter increased by 40 per
cent. This was largely as a result of the flow-through of benefits from
sustainable revenue enhancement and cost reduction projects implemented
specifically at the South African operations over the past year together with
an excellent performance from Tarkwa. The performance at Tarkwa stems from the
implementation of the two major projects - owner mining and the new CIL plant -
which have successfully been brought on line over the past 2 quarters. Total
attributable gold production increased by 4 per cent, as did the production at
the South African operations. Rand per kilogram unit costs again declined and
total rand per ton costs declined by more than 5 per cent, despite continuing
inflation pressures. The Group margin increased from 17 per cent to more than
20 per cent, while the margin for the South African operations was restored to
double digits.
It is particularly pleasing to note that the South African operations operating
costs for the December 2004 quarter have reduced by more than 2 per cent when
compared with the December 2003 quarter. This is despite the increase in gold
production and a 7 per cent wage increase in June 2004.
Gold Fields is in excellent shape with all operations delivering to
Expectations. Performance for the third quarter, traditionally a difficult
period as it includes the effects of the Christmas break, is expected to
improve yet again.`
SA Rand
Salient features
Six months to
Dec Dec
2003 2004
Gold produced* 64,779 63,916 kg
Total cash costs 67,277 65,700 R/kg
Tons milled 23,137 22,866 000
Revenue 85,511 83,381 R/kg
Operating costs 203 205 R/ton
Operating profit 1,114 1,093 Rm
Operating margin 19 19 %
Net earnings 699 182 Rm
146 37 SA c.p.s.
Headline earnings 413 147 Rm
86 30 SA c.p.s.
Net earnings 247 95 Rm
excluding gains and
losses on financial
instruments and
foreign debt net of 52 19 SA c.p.s.
cash and
exceptional items
Salient features
Quarter
Dec Sept Dec
2003 2004 2004
Gold produced* 32,480 31,317 32,599 kg
Total cash costs 66,991 66,516 64,921 R/kg
Tons milled 11,640 11,043 11,823 000
Revenue 84,842 81,815 84,872 R/kg
Operating costs 202 212 198 R/ton
Operating profit 545 456 637 Rm
Operating margin 19 17 22 %
Net earnings 277 102 80 Rm
57 21 16 SA c.p.s.
Headline earnings 249 102 45
51 21 9 SA c.p.s.
Net earnings 111 (6) 101 Rm
excluding gains and
losses on financial
instruments and
foreign debt net of 23 (1) 20 SA c.p.s.
cash and
exceptional items
Salient features US Dollars
Quarter
Dec Sept Dec
2004 2004 2003
Gold produced* (000) oz 1,048 1,007 1,045
Total cash costs $/oz 330 325 308
Tons milled 000 11,823 11,043 11,640
Revenue $/oz 431 400 390
Operating costs $/ton 32 33 30
Operating profit $m 103 72 80
Operating margin % 22 17 19
Net earnings $m 13 16 42
US c.p.s. 3 3 9
Headline earnings $m 8 16 36
US c.p.s. 2 3 7
Net earnings $m 16 (1) 17
excluding gains and
losses on financial
instruments and
foreign debt net of US c.p.s. 3 - 3
cash and
exceptional items
Salient features
Six months to
Dec Dec
2004 2003
Gold produced* (000) oz 2,055 2,083
Total cash costs $/oz 327 295
Tons milled 000 22,866 23,137
Revenue $/oz 416 375
Operating costs $/ton 33 29
Operating profit $m 175 157
Operating margin % 19 19
Net earnings $m 29 98
US c.p.s. 6 21
Headline earnings $m 24 58
US c.p.s. 5 12
Net earnings $m 15 35
excluding gains and
losses on financial
instruments and
foreign debt net of US c.p.s. 3 7
cash and
exceptional items
*Attributable - All companies wholly owned except for Ghana (71.1%).
Commentary
Health and Safety
During the quarter the fatal injury frequency rate regressed from 0.13 to 0.16,
the lost day injury frequency rate regressed from 12.5 to 13.2, while the
serious injury frequency rate improved from 6.7 to 6.1.
While the improvement in the serious injury frequency rate is commendable, the
deterioration in the fatal and lost day injury frequency rates is a source of
concern.
Management attention is focused on these metrics. The Du Pont Health and Safety
Review report, which focused on industry best practice at both the South
African and International operations, was submitted to management, and the
recommendations from this report are being reviewed for implementation by the
operations.
Beatrix continued its good performance into the December quarter by achieving
one million fatality free shifts for the whole mine. Kloof also achieved a
million fatality free shifts during this quarter.
Financial Review
Quarter ended 31 December 2004
compared with quarter ended
30 September 2004
Revenue
Attributable gold production increased by 4 per cent to 1.048 million ounces in
the December 2004 quarter as forecast, from 1.007 million ounces achieved
during the September 2004 quarter. The contribution from the South African
operations increased 4 per cent to 726,000 ounces. The international operations
increased 5 per cent to 322,000 ounces. However, while all the South African
operations were similar to forecast, the international operations exceeded
forecast as a result of a higher than planned increase at Tarkwa due to
the early commissioning of the new mill, partially offset by the lower
production from St Ives due to lower availability of the old mill.
The higher US dollar gold price achieved for the December quarter (US$431 per
ounce, compared with US$400 per ounce in the September quarter) was partially
offset by the strengthening of the rand against the US dollar, from an average
of R6.36 to R6.12 quarter on quarter. As a result, the rand gold price
increased 4 per cent, from R81,815 per kilogram in the September quarter to
R84,872 per kilogram in the December quarter.
The higher production, combined with the higher rand gold price achieved,
resulted in revenue increasing from R2,705 million (US$425 million) to R2,946
million (US$480 million) this quarter.
Operating costs
Operating costs for the December quarter, at R2,341 million (US$382 million),
were virtually unchanged when compared with the September quarter`s R2,336
million (US$367 million). This was despite an increase in tons processed.
Costs at the South African operations were R1,687 million (US$275 million),
which was 1 per cent higher than reported costs in the previous quarter of
R1,664 million (US$262 million) in line with the increase in tons milled.
Underground unit costs remained constant at R557 per ton.
At the international operations, costs were R654 million (US$107 million),
which was 3 per cent lower than the R672 million (US$106 million) reported in
the September quarter. However, if gold in process adjustments are taken into
account costs were slightly higher, in line with the increased gold production.
The net gold inventory credit to costs for the December quarter amounted to R33
million (US$6 million) compared with a credit to costs of R87 million (US$14
million) the previous quarter. The release of gold in process at Tarkwa and
Agnew, was more than offset by a build up of stockpile at St Ives to feed the
new mill. The release at Tarkwa was due to a release of gold from the heap
leach pads.
Operating profit margin
The net effect of the increased revenue and higher costs, after taking account
of gold in process movements, was an operating profit of R637 million (US$103
million).
This is 40 per cent higher than the R456 million (US$72 million) achieved in
the September quarter. The Group margin increased to 22 per cent from 17 per
cent in the September quarter and the South African margin increased from 7 per
cent to 12 per cent. The margin at the international operations was 40 per cent
compared to 36 per cent in the previous quarter.
Amortisation
Amortisation of R379 million (US$62 million) for the December quarter is
virtually unchanged when compared with the September quarter`s R371 million
(US$58 million). Amortisation at the South African operations increased by R6
million (US$1 million) mainly due to the increased production at Kloof. At the
international operations amortisation at Tarkwa increased by 52 per cent R 64
million (US $ 10 million) primarily due to the full implementation of the new
mining fleet and the increased volumes. Amortisation at St Ives decreased 22 per
cent to R80 million(US$13 million) due to the lower mining volumes which peaked
last quarter.
Other income
Net interest and investment income after taking account of interest paid was
constant at R16 million (US$3 million) for the quarter.
Gains on foreign debt and cash amounted to R5 million (US$1 million). This
compares to R16 million (US$3 million) in the September quarter. Both these
amounts were due to exchange gains on 164 million held offshore arising from an
international private placement undertaken in November 2003. These funds are
now held in US dollar, in an offshore account.
The gain on financial instruments of R147 million (US$24 million) compared to a
similar gain of R152 million (US$24 million) in the September quarter and
included a marked to market gain on the Mvela interest rate swap of R140
million (US$23 million), a loss on the Tarkwa rand/US dollar forward cover of
R23 million (US$4 million) and a R30 million (US$5 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 were significantly lower than
long-term rates and the resultant upward sloping yield curve was expected to
prevail for some time. This strategy is yielding positive results as the marked
to market value of the swap at the end of December 2004 was a positive R259
million. Of this, R206 million was accounted for in the income statement and
the balance of R53 million has been hedge accounted and credited to that
portion of the loan that is regarded as debt for accounting purposes. There has
been a positive movement on the interest rate swap for the year to date of R287
million of which R147 million was accounted for in the September quarter,
leaving a balance of R140 million which was accounted for in the December
quarter. In addition, the settlement gain on the swap for the December quarter
(i.e. the gain realised during the quarter) was R23 million. The settlement
gain for the year to date amounts to R54 million. A further settlement gain of
R22 million has been locked in for the three-month period to March 2005. More
details on these financial instruments are given on page 11 of this report.
Exploration expenditure decreased from R55 million (US$9 million) to R39
million (US$7 million) in the December quarter. This was due to timing of
expenditure which should return to prior levels next quarter.
The exceptional loss this quarter of R109 million (US$18 million) was primarily
as a result of costs relating to the failed IAMGold deal of R65 million (US$10
million), the cost of defending the Harmony hostile bid of R83 million (US$13
million), which was partially offset by a profit on the sale of investments of
R39 million (US$6 million).
Costs for the hostile bid include those billed to the end of December plus an
estimate of costs not yet billed. For the September quarter there
were no exceptional items.
Taxation
A taxation charge of R135 million (US$22 million) in the December quarter
compared with R86 million (US$14 million) in the September quarter. This
increase is in line with the higher operating profits.
Earnings
After accounting for minority interests, earnings amounted to R80 million
(US$13 million) or 16 SA cents per share (US$0.03 per share), compared with
R102 million (US$16 million) or 21 SA cents per share (US$0.03 per share) in
the previous quarter. The main reason for this decrease was the cost of the
failed IAMGold transaction and the cost relating to the defence of the Harmony
hostile bid, partially offset by the increase in operating profit.
Headline earnings i.e. earnings less the after tax effect of asset sales,
impairments and the sale of investments, amounted to R45 million (US$8 million)
or 9 SA cents per share (US$0.02 per share) compared with R102 million (US$16
million) or 21 SA cents per share (US$0.03 per share) last quarter. The
difference between net earnings and headline earnings is due to the after tax
profit from the sale of investments amounting to R35 million (US$6 million).
Earnings, excluding exceptional items as well as net gains on financial
instruments and foreign debt net of cash amounted to R101 million (US$16
million) or 20 SA cents per share (US$0.03 per share) compared with a loss of
R6 million (US$1 million) or negative 1 SA cent per share (US$0.00 per
share)reported last quarter.
Cash flow
Cash flow from operating activities for the quarter was R233 million (US$40
million), compared with operating cash flow in the September quarter of R198
million (US$31 million). The increase in cash flow reflects the higher revenue,
offset by an increase in working capital associated with reduced amounts payable
due to the timing of salary payments as well as payments associated with the St
Ives mill.
Capital expenditure amounted to R528 million (US$87 million) compared with
R755 million (US$119 million) in the September quarter. The decrease is mainly
due to the completion of the owner mining project in Tarkwa and the
commissioning of the mills at St Ives and Tarkwa in December and of October
2004 respectively. Expenditure at the South African operations
was R163 million (US$27 million). A significant portion of this expenditure
was directed at the major projects with R31 million at 1 tertiary and 5 shaft
at Driefontein, R24 million at Kloof 4 shaft and R34 million at Beatrix 3
shaft. The Australian operations incurred capital expenditure of R198 million
(A$43 million). The mill project at St. Ives accounted for R60 million (A$13
million) of this expenditure as compared to R186 million (A$41 million) in the
September quarter. The remaining expenditure on this project, which will be
spent during the March quarter, amounts to A$7 million. At Agnew R28 million
(A$6 million) was spent on the Songvang project - refer to the Agnew
commentary for more detail. At the Ghanaian operations, capital expenditure
amounted to R138 million (US$23 million). R78 million (US$13 million) was
spent on the new mill and on the project to convert from contract mining to
owner mining at Tarkwa. This compares with R165 million (US$26 million) in the
previous quarter.
Major projects are still forecast to be in line with approved votes. Proceeds
from the sale of assets amounted to R37 million (US$6 million), R20 million
(US$3 million) from the sale of tenements in Australia and the balance of R17
million from the sale of a winder at Driefontein.
Proceeds on the sale of our investment in Zijin Mining Group Company Limited
amounted to R88 million (US$14 million) and a R17 million (US$3 million) loan
was received from our partner (IDC) in the social development project `Living
Gold` - the rose growing project.
Net cash outflow for the quarter was R167 million (US$26 million). The cash
balance at the end of the December quarter was R2,978 million (US$522 million)
which has declined from R3,409 million (US$524 million) at the end of
September.
Detailed and Operational Review
Group overview
Attributable gold production for the December 2004 quarter increased 4 per cent
to 1,048,000 ounces when compared with the September quarter. Attributable
production from the South African operations at 726,000 ounces accounts for 69
per cent of the Group`s total attributable production.
At the South African operations, there was a 4 per cent increase on the
previous quarter. The increase at Driefontein of 4,200 ounces was due to
increased surface tonnage. At Kloof, the increase of 14,000 ounces was due to
increased underground tonnage at a slightly higher yield and at Beatrix the
increase of 7,500 ounces was due to the improved underground yield from 4.4 to
4.7 grams per ton. Operating profit at the South African operations almost
doubled from R120 million (US$19 million) to R224 million (US$36 million), as a
consequence of the increased production at lower unit costs and the higher rand
gold price.
Production from the Australian operations decreased 8 per cent to 155,600
ounces mainly due to lower volumes processed at the old St Ives mill. Operating
profit from the Australian operations decreased quarter on quarter in rand
terms from R143 million (A$32 million, US$22 million) to R108 million (A$24
million, US$18 million), primarily as a result of the decreased production at
St Ives and a lower GIP credit.
The Ghanaian operations showed a 21 per cent increase in attributable gold
production to 166,600 ounces due to the commissioning of the new mill at Tarkwa
and increased production from the heaps. Tarkwa increased gold production by 34
per cent while Damang was marginally lower as forecast, due to a reduction in
the high grade ore from the main pit. Ghana contributed operating profit of
R305 million (US$50 million), 56 per cent up on the previous quarter`s
operating profit. This is in line with the increase in gold production and the
8 per cent increase in the gold price from US$400 per ounce to US$434 per ounce
this quarter.
The international operations contributed R413 million (US$67 million) or 65 per
cent of the total operating profit of R637 million (US$104 million). This
compares with R336 million (US$53 million) or 74 per cent of the total
operating profit of R456 million (US$72 million) last quarter.
Group ore processed increased from 11.04 million tons to 11.82 million tons as
surface tons increased 9 per cent. This increase was mainly at Tarkwa and was
in line with a build up of production to provide feed to the new mill. The
overall yield decreased from 3.0 grams per ton in the September quarter to 2.9
grams per ton in the current quarter due to the increase in the lower yielding
surface tonnage. Total cash costs in rand terms reduced by over 2 per cent from
R66,516 per kilogram to R64,921 per kilogram. In US dollar terms, total cash
costs increased 2 per cent to US$330 per ounce, compared with US$325 per ounce
last quarter, due to the stronger rand. Operating cost per ton at R198 was 7
per cent below last quarter due to the increase in the surface tons at Tarkwa
at a lower average cost.
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.
During December 2004, the first phase of Project 100 was successfully completed.
The project focused on reducing the consumption of stoping, development and
engineering material via improved benchmarks and standards. Cumulative benefits
against the baseline for the period February 2004 to December 2004 are R100
million. The baseline is the average monthly unit stores costs over the period
May 2003 to October 2003. Of this R100 million, R30 million was realised in the
previous financial year and the balance of R70 million was realised in the
first six months of F2005. Extrapolating this R70 million saving for the full
12 months of F2005, a saving of R140 million is forecast. This is 40 per cent
above targeted savings. The costs have not been normalised for inflation, which
based on the basket of prices for the six month period to December 2004 is 6
per cent. These savings have significantly contributed to the 1 per cent
reduction in operating costs at the South African operations based on a
comparison of the December 2004 quarter against the comparative quarter in the
prior financial year. These savings have been achieved notwithstanding the
above-inflation wage increases.
Project Beyond was established to ensure that supply chain management was in
line with international best practice at Gold Fields Shared Services (GFSS).
Savings of up to 10 per cent are targeted on stores spend of around R3 billion
per annum. In order to achieve these savings stores items have been placed into
several blocks. The analysis of block one, which addressed R345 million of the
R3 billion spend, was completed by December 2004, with contractual savings of
R41 million per annum achieved. These cost savings are expected to be realised
over the next 12 months.
Targeting of the second block of identified commodities started in January 2005
and will address a further R438 million of the R3 billion spend. Based on early
estimates the potential annual savings against contract appears to be in the
region of an additional R43 million. This block is expected to be completed by
March 2005 with actual benefits realised in the next financial year. The
methodologies employed to achieve these savings include:
Larger numbers of suppliers included in the bid process;
The use of electronic reverse auction technologies;
Extensive research into supplier markets;
Long-term contracts and partnering arrangements;
Larger lot sizes.
None of these methodologies impact negatively on suppliers. The approach is
based on partnership, benefit sharing and continuous improvement. Similar
projects for the Australian and Ghanaian operations are in a planning phase.
Other projects include the growth of Black-owned businesses within the supplier
base, which is a key objective of Gold Fields. In December 2004, 29 per cent of
procurement spend was directed at BEE companies, well in excess of the targets
set by most mining groups in South Africa. Furthermore, currently 70 per cent
of Gold Fields` top ten suppliers are BEE companies.
In addition, Gold Fields has demonstrated its commitment to the use of local
suppliers: 82 per cent of BEE suppliers are located in the same municipal or
provincial area as the Gold Fields operation.
Gold Fields` proficiency in procurement is widely recognized within the mining
industry. During October 2004, GFSS received a Gold Award for Logistics
Excellence from a forum of SA logistics professional societies. No other mining
company has received such an award.
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 is delivering results. Underground grades have moved closer to
life of mine averages and where practical surface tonnage at all South African
operations has been 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.
Dec Mar Jun Sep Dec
Quarter ended 2003 2004 2004 2004 2004
Driefontein:
Life of mine head grade as per the
2003 and 2004
annual report 8.7 8.7 8.7 8.1 8.1
Life of mine head grade adjusted
for estimated
metallurgical recoveries 8.4 8.4 8.4 7.8 7.8
Driefontein (underground yields
achieved) 7.5 8.6 8.5 8.1 8.1
Kloof:
Life of mine head grade as per the
2003 and 2004
annual report 9.8 9.8 9.8 10.5 10.5
Life of mine head grade adjusted
for estimated
metallurgical recoveries 9.5 9.5 9.5 10.2 10.2
Kloof (underground yields achieved) 8.6 10.0 9.5 9.1 9.2
Beatrix:
Life of mine head grade as per the
2003 and 2004
annual report 5.1 5.1 5.1 5.5 5.5
Life of mine head grade adjusted
for estimated
metallurgical recoveries 4.9 4.9 4.9 5.3 5.3
Beatrix (underground yields
achieved) 4.7 4.5 4.7 4.4 4.7
Project 400 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.
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.
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 the north and south
operations 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.
Maintain the production profile of +600 thousand ounces per annum.
R78,000 per kilogram plan
As a result of the decrease in the rand gold price to below R80,000 per
kilogram in July 2004 a new mining plan was drawn up at a gold price of R78,000
per kilogram.
Due to the volatility in the gold price and exchange rates, which saw the gold
price once again below R80,000 per kilogram late in December 2004, this plan
continues to be the template for current and future production in conjunction
with project 500.
The plan includes capital reassessment, sourcing higher grade material to
replace surface material, contractor reduction and mine restructuring, amongst
others.
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 at Beatrix the new 3
shaft. In addition, our metallurgical plants have been upgraded.
Environmentalconditions at all shafts have and are being improved through the
ongoing
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. All these measures
should further improve the profitability and strengthen the margins across each
operation.
During January 2005 an additional R24 million of Continuation and Widow Members
(CAWMS) were bought out of the scheme at a premium of 15 per cent to the
actuarial valuation. The residual liability is now only R21 million compared to
an amount in excess of R200 million prior to the commencement of the buy-back.
During the quarter additional shifts were again worked-in so that stockpiles
could be built up to ensure continuous milling over the Christmas period. Over
100,000 tons of underground ore were stockpiled at the South African operations
and subsequently processed over the Christmas break.
Driefontein
December 2004 September 2004
Gold produced - 000`ozs 287.7 283.5
Yield - underground - g/t 8.1 8.1
- combined - g/t 5.4 5.7
Total cash costs - R/kg 67,114 67,419
- US$/oz 341 330
Gold production at Driefontein increased by 2 per cent to 287,700 ounces
quarter on quarter. This improvement was attributable to an increase in surface
tons treated as the number 1 plant mills operate closer to design capacity.
Although underground tons did improve marginally, the underground mining mix
was negatively influenced by an increase in seismic activity at 5 shaft complex
and 1 shaft complex. Ore milled increased by 103,000 tons or 7 per cent to
1,647,000 tons when compared with the September quarter. Underground and
surface yields remained constant quarter on quarter at 8.1 and 1.8 grams per
ton respectively. Metallurgical plant modifications at number 1 SAG mill at one
plant, scheduled in the December quarter, have been successfully completed.
Modifications to the number 2 SAG mill have been scheduled for the March
quarter and should not present a risk to the forecast performance.
Operating costs increased marginally to R625 million (US$102 million) from R622
million (US$98 million) in the September quarter due to the increase in surface
tons processed. Underground rand per ton decreased 3 per cent to R602 per ton,
while surface unit costs increased from R58 to R75 per ton quarter on quarter
due to increased screening of material. Total cash costs reduced to R67,114 per
kilogram from R67,419 per kilogram and in US dollar terms, increased by 3 per
cent from US$330 per ounce to US$341 per ounce. The increase in dollar terms is
in line with a strengthening rand.
Operating profit increased from R99 million (US$16 million) to R135 million
(US$22 million) in the current quarter. The two main contributors were the 4
per cent increase in the rand gold price and the higher gold production.
Capital expenditure increased from R31 million (US$5 million) in the previous
quarter to R42 million (US$7 million) this quarter.
Gold output and costs for the March quarter are likely to be similar to that
achieved in the December quarter, in spite of the Christmas break. Seismic
activity at 5 shaft complex remains a concern. Mining sequencing and the
on-time delivery of the refrigeration plant and backfill infrastructure, are
expected to improve productivity levels at the complex.
Kloof
December 2004 September 2004
Gold produced - 000`ozs 280.6 266.6
Yield - underground - g/t 9.2 9.1
- combined - g/t 6.8 6.6
Total cash costs - R/kg 71,628 73,484
- US$/oz 364 359
Gold production at Kloof increased by 5 per cent to 280,600 ounces in the
December quarter, primarily due to an increase in tons milled. Underground tons
increased 4 per cent to 923,000 tons in the December quarter from 890,000 tons
in the September quarter. This replaced surface tons, which decreased from
369,000 tons to 352,000 tons. The underground yield increased slightly from 9.1
grams per ton last quarter to 9.2 grams per ton this quarter. The combined
yield increased from 6.6 to 6.8 grams per ton.
Operating costs at R649 million (US$106 million) for the quarter increased by 2
per cent compared with the previous quarter`s costs of R636 million (US$100
million), mainly as a result of the increased underground tonnage. Underground
cost per ton declined from R687 to R678. Total cash costs at R71,628 per
kilogram were 3 per cent less than the previous quarter`s R73,484 per kilogram.
In US dollar terms, total cash costs increased from US$359 per ounce to US$364
per ounce.
Operating profit increased from R42 million (US$7 million) to R88 million
(US$14 million) in the current quarter. This was due to the higher gold price
received this quarter and the increase in gold output. Capital expenditure was
virtually unchanged at R63 million (US$10 million).
The March outlook for gold production is similar to the December quarter,
despite the Christmas break and the possible closure of number 3 plant, while
costs should remain flat due to continued cost initiatives. If the current rand
gold price levels continue number 3 plant, which treats surface rock dump
material, may have to cease operations, as the treatment of this material is
uneconomical.
Beatrix
December 2004 September 2004
Gold produced - 000`ozs 157.6 150.1
Yield - underground - g/t 4.7 4.4
- combined - g/t 4.5 4.0
Total cash costs - R/kg 81,351 83,912
- US$/oz 413 410
Gold production at Beatrix increased by 5 per cent from 150,100 ounces in the
September quarter to 157,600 ounces in the December quarter. Underground ore
volumes decreased by 1 per cent from 1,029,000 tons to 1,016,000 tons mainly
due to improved quality mining during the quarter. The overall yield increased
by 13 per cent quarter on quarter, from 4.0 grams per ton to 4.5 grams per ton.
This increase in yield was partially due to reduced surface tonnages, which
reduced from 147,000 tons in the September quarter to 75,000 tons in the
December quarter as a result of the dicontinued tons being uneconomical at the
current gold price. Surface yields increased from 0.8 grams per ton to 1.3
grams per ton due to localised dump grade variations. Underground yields
increased by 7 per cent from 4.4 grams per ton in the September quarter to 4.7
grams per ton in the December quarter. At the Beatrix North and South
operations underground yields increased from an average of 4.2 grams per ton to
4.5 grams per ton, whilst at 4 shaft the underground yield increased from 5.6
grams per ton to 5.8 grams per ton. Stoping volumes at 4 shaft were 8 per cent
lower quarter on quarter as a logistical and remedial work programme was
initiated to position the mine for future volume increases from the new zone 5
area.
This project has made satisfactory progress during the quarter - repairing rail
work, improving ventilation infrastructure and upgrading tunnel support. It is
anticipated that this project will be completed during the financial year,
which will allow 4 shaft more flexibility to mine in zone 5. The stoping and
development build up at 3 shaft continues in line with forecast.
Operating costs increased from R406 million (US$64 million) to R413 million
(US$67 million) due to restructuring costs incurred during the quarter.
However, total cash costs decreased by 3 per cent to R81,351 per kilogram
(US$413 per ounce) from R83,912 per kilogram (US$410 per ounce) in the
September quarter, as a result of strict controls on overall costs and the
higher gold production. At the operating level, Beatrix returned to profit (R1
million and US$nil), as compared with a loss in the September quarter of R20
million (US$3 million).
Capital expenditure remained constant at R58 million (US$10 million). The
majority of this expenditure was spent on development at 3 shaft and the 4
shaft haulage and infrastructure upgrades.
Costs for the March quarter are forecast at the same level as the December
quarter.
Gold production will be slightly lower for the March quarter, as marginal areas
at 2 shaft and surface rock treatment at number 2 plant will be stopped as they
are not making a contribution at the current rand gold price. The above,
together with any loss of production from the Christmas break will be partially
replaced with the planned build up in production at 4 shaft. It is expected
that once crews are redeployed production should return to production levels
historically achieved of approximately 5,000 kilograms (160,000 ounces) per
quarter.
International operations
Ghana
Tarkwa
December 2004 September 2004
Gold produced - 000`ozs 167.9 124.8
Yield - g/t 1.1 0.9
Total cash costs - US$/oz 224 248
Tarkwa`s December quarter gold production increased by 43,100 ounces quarter on
quarter, to 167,900 ounces. Of this increase, 15,200 ounces came from heap
leach operations and 27,900 ounces from the new CIL plant.
The commissioning of the new CIL plant was completed at the end of October,
approximately two months ahead of schedule. During the quarter, the plant
treated 846,000 tons at an average head grade of 1.45 grams per
ton. The head grade continues to trend towards the target of 1.8
grams per ton.
Recovery averaged 97 per cent for November and December against a design
recovery of 96 per cent. Total gold in process at the mill is estimated at
about 10,000 ounces. During the month of December the plant was off-line for
ten days for repairs to the mill discharge hopper and to complete other
structural modifications.
Ore stacked on the leach pads was stable at 4.1 million tons at a grade of 1.21
grams per ton compared with 1.33 grams per ton last quarter. This planned
decrease in grade reflects the diversion of higher grade ores to the mill and
lower grade ores to the heaps. Gold production from the heaps for the quarter
was 140,000 ounces. The increase over the previous quarter largely reflects a
release of gold in process at the heaps of 11,500 ounces.
The total tons mined decreased by 2 million tons to 18.7 million tons and the
stripping ratio decreased from 3.87 to 2.84. As previously reported the former
mining contractor operated in parallel with the new owner mining fleet for a
portion of the September quarter, accounting for the quarter on quarter
decline. In the September quarter the contractor focussed on waste removal
resulting in the high strip ratio of 3.87, which has now returned to typical
levels of 2.95. The performance of the owner mining fleet remains within
expectation. Mining costs were US$0.69 per ton for the quarter compared with
US$0.83 per ton last quarter, reflecting the final demobilisation of the mining
contractor in the previous quarter.
Operating costs at US$37 million (R230 million), including gold in process
adjustments, were US$6 million higher than the previous quarter, reflecting the
costs of operating the new mill and a US$0.5 million GIP charge against a
US$3.1 million credit in the previous period. Operating costs per ton treated
were US$7.51 per ton against US$8.36 per ton in the September quarter,
reflecting both the lower strip ratio and the impact of higher volumes treated.
Total cash costs decreased from US$248 per ounce to US$224 per ounce for the
quarter, reflecting the increase in gold production and the lower strip ratio.
The net result was that operating profit increased from US$19 million (R121
million) in the previous quarter to US$35 million (R219 million) in the current
quarter. This increase was assisted by the average gold price received for the
quarter, which increased from US$401 per ounce to US$437 per ounce.
Capital expenditure decreased from US$30 million (R194 million) in the previous
quarter to US$20 million (R118 million) in the current quarter as a result of
the progress in closing out the mining fleet acquisition and the reduction in
construction work on the CIL plant.
Gold production is expected to increase by at least a further 10 per cent in
the March quarter, with some two thirds of total production coming from the
heaps and the balance from the mill. With the third lift stacking now underway
at the North and South heaps, gold produced from the heap leach operation is
expected to reduce somewhat in the upcoming quarter due to anticipated gold in
process movements.
Total cash costs are expected to approach US$200 per ounce in the March quarter
as the full benefits of the expansion start to be realised.
Damang
December 2004 September 2004
Gold produced - 000`ozs 66.5 69.1
Yield - g/t 1.5 1.6
Total cash costs - US$/oz 226 238
Gold production for the quarter declined slightly to 66,500 ounces as forecast,
from 69,100 ounces produced during the September quarter.
Mill throughput for the quarter was maintained at 1.35 million tons at a head
grade of 1.67 grams per ton, compared with a head grade of 1.78 grams per ton
in the September quarter. The decrease in the head grade is a result of lower
high grade tons from the Damang pit, which is reaching the end of the life
of its current cutback, and the plant was supplemented with lower grade
stockpile material feed.
Ore tons mined decreased to 796,000 tons from 1,257,000 tons in the previous
quarter, primarily due to expected mining constraints with the ramp down of the
Damang pit together with unseasonal rainfall. Total tons mined decreased to 1.9
million tons from 2.7 million tons. The stripping ratio for the quarter
increased from
1.18 to 1.38.
Operating costs, including gold in process adjustments, decreased to US$15
million (R89 million) from US$16 million (R103 million) quarter on quarter,
with operating costs per ton milled improving to US$10.99 from US$11.36 the
previous quarter.
Operating costs also benefited from the recovery of some 577,000 tons of low
grade ore not previously included in the stockpile inventory. Total cash costs
for the quarter reduced to US$226 per ounce compared with US$238 last quarter.
With the average gold price increasing from US$399 per ounce to US$433 per
ounce, revenue increased from US$28 million (R175 million) to US$29 million
(176 million) for the quarter and operating profit increased from US$11 million
(R73 million) to US$14 million (R86 million).
Capital expenditure incurred during the quarter amounted to US$3 million (R19
million). The majority of this expenditure was on the Damang cutback
pre-feasibility and the Damang extension projects.
While mill throughput for the March quarter is projected to be maintained at
1.35 million tons, gold production is expected to decline slightly as the mine
focuses on treating lower grade stockpiled ores, while ore mining in the new
Amoanda pit and Juno pits is ramped up, following removal of overburden. Total
cash costs will increase on the back of the lower gold production and a
substantial increase in mining volumes with the operations in Amoanda and Juno
pits.
Australia
St Ives
December 2004 September 2004
Gold produced - 000`ozs 106.6 123.2
Yield - g/t 2.6 2.8
Total cash costs - A$/oz 463 420
- US$/oz 348 297
Gold production for the quarter decreased 13 per cent to 106,600 ounces when
compared with 123,200 ounces produced in the September quarter. This decrease
reflects a significant reduction in volume through the old St Ives mill, with
tons treated declining from 790,000 tons in the September quarter to 662,000
tons in the December quarter, while head grade was stable at 4.7 grams per ton.
The drop in volume is largely due to a 5 day shutdown along with numerous
mechanical breakdowns, reflecting the age of this plant and its ramp down as
the new mill is commissioned.
Total mining operations produced 1.18 million tons of ore during the quarter,
reflecting a planned reduction from 1.76 million tons mined in the September
quarter.
This reduction reflects the focus on waste movement in the December quarter in
the open pits along with the increased activity in the September quarter with
the need to build ore stock piles ahead of the commissioning of the new Lefroy
mill in December 2004. During the quarter, open pit mining operations performed
well, mining a total of 8.2 million tons of ore and waste, at an average strip
ratio of 11.5 (September: 7.7 million tons at a strip ratio of 6.4). The
underground operations also performed to expectation. A reduction in ore
volumes from Junction, in line with its expected decline, was partially offset
by increased output from the Leviathan complex.
Total cash costs, which include a gold in process inventory adjustment,
increased from A$420 per ounce (US$297 per ounce) to A$463 per ounce (US$348
per ounce). This increase reflects primarily the significantly lower volume of
gold produced but is also affected by the cost of the mill shutdown, the cost
of mill commissioning and the increase in strip ratio that is expensed.
Operating profit at St. Ives of A$13 million (R59 million) decreased 41 per
cent when compared with the A$22 million (R98 million) for the September
quarter, which reflects the lower gold production.
Capital expenditure for the December quarter amounted to A$32 million (R148
million) compared with A$73 million (R330 million) in the September 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 the commissioning of the new Lefroy mill in December, and ramp up through
January, production for the March quarter is expected to be significantly
higher than the December quarter. Operating costs are expected to improve
through the quarter as the new mill reaches full production although the
benefit will not be that significant during the coming quarter, as the old mill
is likely to be run in parallel with the new mill for the first half of the
March quarter. Total cash costs will also include significant GIP charges as
high cost ounces mined in previous periods are consumed during the new mill
ramp up in the March quarter.
Agnew
