| Thu 4 Aug 2005, 8:19 | | Gold Fields Limited - Interim Results |
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Gold Fields Limited - Interim 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 and Year Ended 30 June 2005
News Release Q4 F2005 and Year F2005 Results
- Reviewed preliminary results -
Record gold production at both Ghana and Australia for the quarter
JOHANNESBURG. 4 August 2005 - Gold Fields Limited (NYSE & JSE: GFI) today
announced June 2005 quarter headline earnings of R135 million compared with R9
million in the March 2005 quarter and R129 million for the June quarter of 2004.
In US dollar terms headline earnings for the June 2005 quarter equated to US$21
million compared with US$2 million in the March 2005 quarter and US$20 million
for the June quarter of 2004. Net earnings excluding gains and losses on
financial instruments and foreign debt net of cash and exceptional items were
R230 million (US$37 million) for the June 2005 quarter compared with R128
million (US$21 million) in the March quarter.
June 2005 quarter salient features:
* Attributable gold production maintained at 1.08 million ounces;
* Total cash costs R67,773 per kilogram (US$330 per ounce);
* Operating profit up 22 per cent to R656 million (US$103 million), inclusive
of a 35 per cent increase at the South African operations;
* Mvela interest rate swap closed-out, resulting in a net cash inflow
of R264 million.
Year ended June 2005 salient features:
* Attributable gold production increased 2 per cent to 4.22 million ounces;
* Total cash costs R66,041 per kilogram (US$331 per ounce), a 2 per cent
improvement on the previous year;
* Harmony hostile bid successfully defended;
* Earnings decreased from R768 million (US$111 million) to R180 million
(US$29 million) year on year;
* Group cash R3.4 billion, providing a strong financial platform for growth;
* Offshore organic growth projects successfully completed and delivering
results;
* Samrec/IASA award for best reporting of Mineral Reserves for the third year
in succession.
Final dividend of 40 SA cents per share, giving a total dividend of 70 SA cents
per share for the year.
Ian Cockerill,
Chief Executive Officer of Gold Fields said:
`Gold Fields has delivered another solid operating performance for the
June quarter 2005.
At the South African operations Driefontein and Beatrix posted good
performances with gold production increasing by 2 per cent and 6 per cent
respectively. Kloof had a disappointing quarter due to lower grades mined.
Costs have remained well controlled and this, together with higher prices
achieved, has contributed to a pleasing 35 per cent improvement in operating
profit from the South African operations.
The international operations have had another excellent quarter increasing
production by 4 per cent, as the benefits of the completed expansion projects
were realised. Tarkwa has increased production by a further 8 per cent quarter
on quarter. The completion of the new mill and the closure of the old mill at
St Ives in the June quarter means that it is now well positioned to produce at
lower costs. Damang and Agnew continue to deliver on the upside with Agnew
increasing production by 23 per cent and Damang increasing production by 8 per
cent.
While financial 2005 has been a particularly challenging one for Gold Fields
given the Harmony hostile bid and the strength of the rand, I am pleased to
note that Gold Fields has remained focused on delivering against its stated
objectives. Group production for the year has increased by 2 per cent and costs
have been well controlled with an improvement of 2 per cent year on year. At
the South Africa operations production was marginally higher at 2.82 million
ounces and costs were marginally lower despite wage increases at the
commencement of the year that were above inflation. Cost performance has been
excellent with Project 100 delivering 40 per cent above targeted savings and
Project Beyond delivering R103 million of contractual savings on historic
baseline expenditure in its first year. The latter savings will be realised in
costs in the next financial year. Our offshore organic growth projects have
been well executed on time and on budget and are now delivering results. The
group cash balance remains strong at R3.4 billion, providing us with an
excellent platform for future growth.
These results underpin our focus on delivering value to shareholders. Our
growth strategy of adding 1.5 million ounces of offshore production to our
portfolio by 2009 remains unchanged, and we continue to focus on building a
strong internationally diversified portfolio of high quality, long life
assets.`
Stock data
Number of shares in issue
- at end June 2005 492,294,226
- average for the quarter 492,294,226
Free Float 100%
ADR Ratio 1:1
Bloomberg / Reuters GFISJ / GFLJ.J
JSE Securities Exchange South Africa-(GFI)
Range - Quarter ZAR58.15 - ZAR77.90
Average Volume - Quarter 1,600,339 shares / day
NYSE - (GFI)
Range - Quarter US$9.40 - US$11.70
Average Volume - Quarter 1,522,032 shares / day
SA Rand
Year ended
Salient features June June
2004 2005
kg Gold produced* 129,329 131,284
R/kg Total cash costs 67,075 66,041
000 Tons milled/treated 46,028 47,880
R/kg Revenue 85,905 84,218
R/ton Operating costs 204 198
Rm Operating profit 2,315 2,286
% Operating margin 20 19
Rm 768 180
Net earnings
SA c.p.s. 158 37
Rm 763 291
Headline earnings
SA c.p.s. 157 59
Net earnings
Rm excluding gains and 587 452
losses on financial
instruments and
SA c.p.s. foreign debt net of 121 92
cash and exceptional items
SA Rand
Quarter
Salient features June March June
2004 2005 2005
kg Gold produced* 32,419 33,845 33,523
R/kg Total cash costs 66,218 64,957 67,773
000 Tons milled/treated 11,076 12,789 12,225
R/kg Revenue 83,731 81,952 88,076
R/ton Operating costs 213 184 202
Rm Operating profit 545 537 656
% Operating margin 19 18 21
Rm (186) 11 (14)
Net earnings
SA c.p.s. (39) 2 (3)
Rm 129 9 135
Headline earnings
SA c.p.s. 26 2 27
Net earnings
Rm excluding gains and 102 128 230
losses on financial
instruments and
SA c.p.s. foreign debt net of 21 26 47
cash and exceptional items
US Dollars
Quarter
Salient features June March June
2005 2005 2004
Gold produced* (000) oz 1,078 1,088 1,042
Total cash costs $/oz 330 340 312
Tons milled/treated 000 12,225 12,789 11,076
Revenue $/oz 429 428 395
Operating costs $/ton 32 31 32
Operating profit $m 103 90 83
Operating margin % 21 18 19
$m (3) 2 (25)
Net earnings
US c.p.s. - - (5)
$m 21 2 20
Headline earnings
US c.p.s. 5 - 4
Net earnings
$m 37 21 16
excluding gains and
losses on financial
instruments and
foreign debt net of US c.p.s. 8 4 4
cash and exceptional items
Year ended
Salient features June June
2005 2004
Gold produced* (000) oz 4,219 4,158
Total cash costs $/oz 331 302
Tons milled/treated 000 47,880 46,028
Revenue $/oz 422 387
Operating costs $/ton 32 30
Operating profit $m 368 336
Operating margin % 19 20
$m 29 111
Net earnings
US c.p.s. 6 23
$m 47 111
Headline earnings
US c.p.s. 10 23
Net earnings
$m 73 85
excluding gains and
losses on financial
instruments and
foreign debt net of US c.p.s. 15 18
cash and exceptional items
*Attributable - All companies wholly owned except for Ghana (71.1%).
Health and Safety
We regret the 10 fatalities which occurred during the June quarter. As
previously reported, a seismic event at Driefontein 2 shaft claimed five lives
on 10 May 2005. The fatal injury frequency rate regressed as a result of the
above from 0.14 to 0.28 for the June quarter. This quarter has seen an increase
in seismic events at the West Wits operations, Driefontein and Kloof, which has
resulted in an increase in fall of ground accidents. As a result the lost day
injury frequency rate regressed from 12.2 to 14.1, and the serious injury
frequency rate regressed from 5.8 to 7.0 quarter on quarter.
Beatrix North and South achieved 3 million underground fatality free shifts.
Beatrix North shaft recorded 1.9 million, Driefontein 8 shaft 1.4 million and
Kloof 8 shaft 0.9 million fatality free shifts.
The international operations continued their good safety performance, with all
four operations achieving year on year reductions in lost time injuries.
Financial Review
Quarter ended 30 June 2005
compared with quarter ended 31 March 2005
Revenue
Attributable gold production decreased by 1 per cent to 1,078,000 ounces in the
June 2005 quarter, compared with 1,088,000 ounces achieved in the March 2005
quarter. Production at the South African operations was 687,000 ounces, which
was 3 per cent lower than the previous quarter. Attributable production at the
international operations increased 4 per cent to 391,000 ounces. At the South
African operations, Driefontein and Beatrix increased production but this was
more than offset by the poor performance of Kloof, resulting from the lower
grades mined during the quarter. The 4 per cent increase at the international
operations was due to increased output at all the operations except St Ives,
which was lower as the old and new mill operated in parallel for the whole of
the previous quarter, with the old mill decommissioned at the end of the
previous quarter.
The US dollar gold price was virtually unchanged at US$429 per ounce compared
with the March quarter. However, the weakening of the rand against the US
dollar, from an average of R5.95 to R6.39, resulted in the rand gold price
increasing 7 per cent, from R81,952 per kilogram in the March quarter to
R88,076 per kilogram in the June quarter.
The decrease in production was more than offset by the increase in the rand
gold price achieved resulting in revenue increasing from R2,950 million (US$495
million) to R3,156 million (US$492 million) this quarter.
Operating costs
Operating costs for the June quarter, at R2,474 million (US$386 million),
increased by 5 per cent when compared with the March quarter`s R2,351 million
(US$395 million).
Costs at the South African operations increased by R11 million to R1,660
million (US$258 million), which was less than 1 per cent higher than operating
costs in the previous quarter of R1,649 million (US$277 million) evidencing
continued good cost control.
Costs at the international operations, including gold-in- process changes, were
R840 million (US$132 million), 10 per cent higher than the R764 million (US$128
million) reported in the March quarter. The increase in costs at the
international operations were mainly at Tarkwa due to the increased costs
associated with the owner mining maintenance contract and increases in the cost
of consumable, together with the effect of translating costs at a weaker rand.
The 7 per cent weaker rand compared with the US dollar as detailed above and
the 6 per cent weakening of the rand against the Australian dollar, from R4.62
to R4.91, resulted in an increase in costs of R56 million.
Operating profit margin
The net effect of the movements in revenue and costs, after taking into account
gold-in-process changes, was an operating profit of R656 million (US$103
million). This is 22 per cent higher than the R537 million (US$90 million)
achieved in the March quarter. The Group margin increased from 18 per cent last
quarter to 21 per cent in the June quarter, while the margin at the South
African operations increased from 9 per cent to 12 per cent. The margin at the
international operations increased to 34 per cent compared with 33 per cent in
the previous quarter.
Amortisation
Amortisation of R391 million (US$61 million) for the June quarter increased 5
per cent when compared with the March quarter`s R371 million (US$62 million).
This increase arose largely at the Australian operations due to an increase in
mining volumes, and the weakening of the rand against the US dollar.
Amortisation at the South African operations was constant at R168 million.
Other income
Net interest and investment income after taking into account interest paid
decreased from R34 million (US$6 million) in the March quarter to R15 million
(US$2 million) for the June quarter. This decrease in net interest is due to
gains on the Mvela interest rate swap of R33 million included in earnings in
the previous quarter compared with R23 million included this quarter, with the
balance of R9 million being our 33 per cent share of losses incurred at Rand
Refinery, which is equity accounted.
The gain on financial instruments of R100 million (US$16 million) compares to a
loss of R55 million (US$8 million) in the March quarter and represents largely
realised gains on these instruments. Included in the quarter is a realised gain
on the Mvela interest rate swap of R91 million (US$14 million), a gain on the
Tarkwa rand/US dollar forward cover of R13 million (US$2 million) and a gain on
diesel call options in Ghana of R2 million, partially offset by a R6 million
(US$1 million) loss 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 yielded positive results producing net
cash inflows on closure of R264 million (US$41 million) for the quarter and
R317 million (US$51 million) of positive cash flow from inception of the swap.
More details on these financial instruments are given on page 15 of this
report.
Exploration expenditure
Exploration expenditure increased from R43 million (US$7 million) to R61
million (US$10 million) in the June quarter - please refer the Exploration and
Corporate Development section for more detail.
Exceptional Items
The exceptional loss this quarter of R359 million (US$58 million) includes the
following impairments:
# Beatrix North and South sections were impaired by R124 million (US$20
million) during the quarter, with the after tax value amounting to R100 million
(US$16 million). The impairment was due to the effect of restructuring at
Beatrix South which is the old 2 shaft section of the mine.
The impairment was based on a calculated net present value, using a gold price
of R92,000 per kilogram at a real discount rate of 5 per cent before tax and
applying a 1.5 times multiple i.e. a one and a half times multiple of market
price to net present value. The carrying value of the Beatrix North and South
sections after the write-down is R1,967 million;
# At Driefontein an impairment of R12 million (US$2 million), equal to R7
million (US$1 million) after taxation due to the closure of 10 shaft;
# At Kloof an impairment of R11 million (US$2 million), equal to R7 million
(US$1 million) after taxation due to the closure of no. 3 metallurgical plant;
# At St Ives the write-off of the old mill, amounting to R61 million
(A$13 million); and
# At Living Gold (the rose project at Driefontein) a write down of R52 million
(US$8 million), which had no tax effect.
Also included in exceptional items are the final cost and provisions for
defending the Harmony hostile bid of R145 million (US$23 million), bringing the
total cost to R316 million (US$51 million). Added to this is a write-off of
critical spares relating to the old mill at St Ives of R17 million (A$4
million).
The above were partially offset by gains on the sale of exploration rights in
Chile of R47 million (US$8 million) and the profit on the sale of shares in
African Eagle Resources Limited of R10 million (US$2 million).
The exceptional loss in the March quarter of R86 million (US$14 million) was
mainly related to costs incurred in defending the Harmony hostile bid.
Taxation
A taxation credit of R57 million (US$9 million) in the March quarter compares
with a credit of R62 million (US$10 million) in the June quarter. The main
reason for the credit this quarter is a deferred tax credit of A$36 million
(R167 million) in Australia. This credit was due to a step up in tax values of
assets in Australia resulting from the consolidation of the Australian
operations for tax purposes as from 1 July 2003.
Added to this is the tax credit on the Beatrix impairment, which amounted to
R24 million. These were partially offset by the increase in taxable income due
to the increased profits for the quarter.
The credit last quarter was mainly deferred tax credits of R65 million (US$11
million) at Tarkwa and R6 million (US$1 million) at Damang as a result of a
decrease in the tax rate in Ghana from 32.5 per cent to 28 per cent.
Earnings
After accounting for minority interests, a loss of R14 million (US$3 million)
was incurred or negative 3 SA cents per share (US$0.00 per share), compared
with earnings of R11 million (US$2 million) or 2 SA cents per share (US$0.00
per share) in the previous quarter.
Headline earnings i.e. earnings less the after tax effect of asset sales,
impairments and the sale of investments, was R135 million (US$21 million) or 27
SA cents per share (US$0.05 per share) compared with R9 million (US$2 million)
or 2 SA cents per share (US$0.00 per share) last quarter.
Earnings, excluding exceptional items as well as net gains and losses on
financial instruments and foreign debt net of cash amounted to R230 million
(US$37 million) or 47 SA cents per share (US$0.08 per share) compared with R128
million (US$21 million) or 26 SA cents per share (US$0.04 per share) reported
last quarter.
Cash flow
Cash flow from operating activities for the quarter was R708 million (US$110
million), which was 9 per cent above the operating cash flow in the March
quarter of R653 million (US$106 million). This is due to the increase in
operating profit and the closure of the Mvela interest rate swap, which
resulted in a net inflow of R264 million (US$41 million), offset by the cost of
the Harmony defence and the increase in exploration and sundry costs.
No dividends other than those paid to Ghanaian minorities of R48 million (US$7
million) were paid during the quarter. Last quarter R147 million (US$25
million) was paid in dividends.
Capital expenditure amounted to R442 million (US$68 million) compared with R440
million (US$75 million) in the March quarter. Expenditure at the South African
operations was R24 million higher at R175 million (US$27 million). A
significant portion of this expenditure was directed at the major projects,
with R36 million at 1 tertiary and 5 shaft at Driefontein, R10 million at Kloof
4 shaft and R28 million at Beatrix 3 shaft. The Australian operations incurred
capital expenditure of R122 million (A$24 million) compared with R151 million
(A$32 million) in the March quarter. Expenditure at St Ives included
development costs at Argo and Leviathan underground, and Mars open pit. At
Agnew, the majority of the expenditure was spent on development, exploration
and upgrading of the metallurgical plant. At the Ghanaian operations, capital
expenditure amounted to R117 million (US$18 million) mainly on the new heap
leach projects at the North and South sections. This compares with R77 million
(US$13 million) in the previous quarter. Major projects are still forecast to
be in line with approved votes. Proceeds on disposal of various Group wide
mining assets amounted to R24 million (US$4 million) for the quarter.
Purchase of investments amounted to R17 million (US$3 million). R7 million
(US$1 million) of this included equipment financing at St Ives, with the
balance being the purchase of additional shares in African Eagle Resources
amounting to R10 million. Subsequently, the majority of our holding (8.5
million shares) held in African Eagle Resources was sold and proceeds amounted
to R19 million (US$3 million). The balance of the proceeds on investments sold
amounted to R47 million (US$7 million) and arose from the sale of the Angelina
project in Chile.
Net cash inflow for the quarter was R257 million (US$42 million). After
accounting for a positive translation adjustment for the quarter of R188
million (US$13 million negative) the cash balance at the end of the June
quarter was R3,375 million (US$504 million), which has increased from R2,931
million (US$474 million) at the end of March 2005.
Detailed and Operational Review
Group overview
Attributable gold production for the June 2005 quarter decreased marginally to
1,078,000 ounces when compared with the March quarter. Production from the
South African operations at 687,000 ounces accounted for 64 per cent of the
Group`s total attributable production, compared with 711,000 ounces or 65 per
cent last quarter.
At the South African operations, gold production decreased 3 per cent compared
with the previous quarter. At Kloof, the decrease of 38,900 ounces was mainly
due to a reduction of recovered yield during the quarter. The decline at Kloof
was partially offset by an increase at Driefontein of 4,400 ounces due to
increased underground volumes, and an increase at Beatrix of 9,700 ounces as a
result of the redeployment of crews to more productive areas, particularly 4
shaft. Operating profit at the South African operations increased from R166
million (US$28 million) to R224 million (US$35 million), mainly as a
consequence of the higher gold price, allied with continued good cost control.
Production from the Australian operations was 1 per cent higher quarter on
quarter at 208,200 ounces. The increased production from the Songvang open pit
at Agnew together with an excellent performance from Kim underground, offset
the decrease at St Ives, which benefited from running both the old and new
mills last quarter. Operating profit from the Australian operations increased
quarter on quarter in rand terms from R120 million (A$26 million, US$20
million) to R159 million (A$33 million, US$25 million), primarily as a result
of the increased production at Agnew. The Ghanaian operations showed an 8 per
cent increase in attributable gold production to 183,000 ounces. Tarkwa and
Damang both increased gold production by approximately 8 per cent. At Tarkwa
the increase was due to slightly increased yield and volume, and at Damang the
increase was due to increased feed grade. Ghana contributed operating profit of
R274 million (US$43 million), a 9 per cent increase when compared with the
March quarter.
The international operations contributed R433 million (US$68 million) or 66 per
cent of the total operating profit of R656 million (US$103 million). This
compares with R371 million (US$62 million) or 69 per cent of the total
operating profit of R537 million (US$90 million) last quarter.
Group ore processed decreased from 12.79 million tons to 12.23 million tons,
while overall yields increased 4 per cent to 2.9 grams per ton. Total cash
costs in rand terms increased 4 per cent to R67,773 per kilogram, compared with
R64,957 per kilogram in the March quarter. In US dollar terms, total cash costs
decreased 3 per cent to US$330 per ounce, compared with US$340 per ounce last
quarter, due to the weaker rand.
Operating cost per ton at R202 was 10 per cent above last quarter due to the
decrease in surface tons across the Group. At the South African operations
surface tons reduced at all the operations, which are in the process of
replacing surface tonnage with higher grade underground tons.
At the international operations the decrease in surface tons was mainly at St
Ives due to the decommissioning of the old mill.
South African operations
During the September 2003 quarter management took the 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 grades more in line
with Life of Mine ore reserve values).
To support this switch in strategy in September 2003, management introduced an
initiative called Project 500, which, in turn, was split into two sub-projects
called: Project 400 and Project 100.
Project 400 was aimed at optimising revenue such that an additional R400
million would be generated per annum on an ongoing basis. This was to be
achieved by eliminating non- contributing production and at the same time
reducing low grade surface outputs with higher margin underground material.
This strategy has proven successful and Beatrix returned a credible operating
profit for the first time this year as surface material was eliminated
completely from the mix.
At the South African operations this strategy has led to an increase in
underground yields year on year from 7.1 to 7.4 grams per ton at similar mining
volumes, while surface tonnage in South Africa has been managed down to 4.4
million tons, a decrease of over 20 per cent. The life of mine grades are given
in the table below.
Quarter ended Jun Sep Dec Mar Jun
2004 2004 2004 2005 2005
Driefontein:
Life of mine head grade as per the 2003 and
2004 annual report 8.7 8.1 8.1 8.1 8.1
Life of mine head grade adjusted for
estimated metallurgical recoveries 8.4 7.8 7.8 7.8 7.8
Driefontein (underground yields achieved) 8.5 8.1 8.1 8.9 8.3
Kloof:
Life of mine head grade as per the 2003 and
2004 annual report
Life of mine head grade adjusted for 9.8 10.5 10.5 10.5 10.5
estimated metallurgical recoveries 9.5 10.2 10.2 10.2 10.2
Kloof (underground yields achieved) 9.5 9.1 9.2 9.7 8.3
Beatrix:
Life of mine head grade as per the 2003 and
2004 annual report 5.1 5.5 5.5 5.5 5.5
Life of mine head grade adjusted for
estimated metallurgical recoveries 4.9 5.3 5.3 5.3 5.3
Beatrix (underground yields achieved) 4.7 4.4 4.7 5.2 5.6
Project 100 and Project 100+
Following the successful completion of Project 100 during December 2004, Gold
Fields established a new project, Project 100+, utilising the capabilities and
skills developed during Project 100. Project 100+ is focused on achieving
ongoing and sustainable costsavings across the South African operations. It is
an evergreen project management structure that maintains a pipeline of
value-adding projects, ensuring their progress from concept stage to final
realisation.
At the end of June 2005, Project 100+ had identified more than fifteen projects
with potential savings of R200 million per annum. Many of the
projects are in the design phase with benefit realisation expected during the
2006 financial period and beyond. Three projects, which are expected to deliver
annual savings from financial 2006 of R30 million, are complete.
Project Beyond, initiated in early 2004, is a procurement initiative targeting
annual savings of between R200 million and R300 million per annum over three
years, i.e. around 10 per cent of the amount expended on materials, services
and capital expenditure at the South African operations. During the past
financial year, the project targeted to deliver R100 million in contractual
savings. Three distinct blocks of strategic sourcing initiatives were
completed, focusing on overall procurement expenditure of almost R900 million,
with roughly R200 million of spend still in progress. The project delivered
R103 million of contract savings (12.3 per cent) on historic baseline
expenditure. Savings were achieved on commodities such as grinding media,
foodstuffs, mill liners, ore transport, roof and timber support, bearings,
engineering repairs, and lubricants. Savings are realised as new contracts come
into force and are being utilised by the mining operations. As a consequence
these savings will largely be realised in the 2006 financial year. Gold Fields
will continue with procurement savings initiatives in support of its cost
leadership strategy and is targeting a further R75 million to R100 million
savings per annum at the local operations during the 2006 financial period.
Relationships with suppliers have not been compromised as a consequence of
these initiatives.
It is noteworthy that, despite the achievement of major contractual savings in
procurement, expenditure with BEE companies increased to over 28 per cent
during the quarter.
Further, Gold Fields benchmarked its BEE procurement outcomes with those of
other South African major mining groups and confirmed its leading position.
The scope of Project Beyond is being extended to include the Australian and
Ghanaian operations, as well as the Peruvian Cerro Corona project. Preliminary
indications are that savings of more than US$20 million per annum may be
achieved.
Driefontein
June 2005 March 2005
Gold produced - 000`ozs 297.9 293.5
Yield - underground - g/t 8.3 8.9
- combined - g/t 5.3 5.2
Total cash costs - R/kg 64,548 64,520
- US$/oz 314 337
Driefontein posted another encouraging set of results, with an increase in gold
production from 293,500 ounces to 297,900 ounces quarter on quarter. The
underground grade reduced from 8.9 grams to 8.3 grams per ton for the quarter
as the higher gold price allowed more mining from some of the marginal areas on
the western boundary of the operations.
The combined yield from surface and underground increased from 5.2 grams per
ton in the March quarter to 5.3 grams per ton due to improved underground
volumes and mining mix this quarter. Underground tonnage increased 7 per cent
from 914,000 to 978,000 tons, while surface mineralised waste tonnage reduced
from 846,000 tons to 765,000 tons quarter on quarter.
The increase in underground ore tonnage had a 2 per cent impact on operating
costs, which increased from R614 million (US$103 million) in the March quarter
to R625 million (US$97 million) in the June quarter. Total cash costs remained
flat in rand terms at R64,548 per kilogram. In US dollar terms, total cash
costs decreased by 7 per cent from US$337 per ounce to US$314 per ounce as a
result of the weaker rand.
Operating profit increased by 41 per cent from R133 million (US$22 million) in
the March quarter to R188 million (US$30 million) in the June quarter, as a
result of the increase in the rand gold price and the increase in gold output.
Capital expenditure increased to R75 million (US$12 million) for the June
quarter from R37 million (US$6 million) in the March quarter, in line with our
policy to defer capital costs in a low rand gold price environment as was the
case in the March quarter.
Gold forecast for the September quarter is slightly lower than in the June
quarter. This is due to a further reduction in the surface grade and the last
of the gold clean-up from No 1 plant. This could be further influenced by the
outcome of the wage negotiations and calls from Cosatu for stay-aways. The cost
profile for the September quarter will be affected by the wage increases
implemented as from 1 July 2005.
Kloof
June 2005 March 2005
Gold produced - 000`ozs 225.5 264.4
Yield - underground - g/t 8.3 9.7
- combined - g/t 7.8 6.7
Total cash costs - R/kg 85,445 73,915
- US$/oz 416 386
Gold production at Kloof decreased 15 per cent from 264,400 ounces in the March
quarter to 225,500 ounces in the June quarter. This was largely due to a 16 per
cent decrease in broken grade attributable to high grade panels lost due to
seismicity in the 3 shaft pillar and the 8 shaft complex.
Number 3, 4 and 7 shafts experienced grade drop-offs due to more slope mining
during the quarter and a concomitant reduction in terrace mining. Slope mining
is generally associated with lower grades. The stopping of low grade surface
stockpile operations at number 3 metallurgical plant resulted in a decrease of
4,800 ounces quarter on quarter.
Despite the public holidays and industrial action underground tonnage increased
from 826,000 tons in the March quarter to 832,000 tons in the June quarter.
Unfortunately underground yields declined from 9.7 to 8.3 grams per ton as a
result of the issues previously mentioned. Surface tonnage decreased
significantly due to the closure of number 3 metallurgical plant. Further
surface treatment will depend on the economics of the low grade surface
stockpile.
Despite the increase in underground tons milled for the quarter, operating
costs at R624 million (US$97 million) for the quarter decreased by 1 per cent
compared with the previous quarter`s cost of R634 million (US$107 million).
This resulted in an underground cost of R741 per ton, which was similar to the
previous quarter. However, total cash costs increased by 16 per cent to R85,445
per kilogram (US$416 per ounce) compared with the previous quarter of R73,915
per kilogram (US$386 per ounce) in line with the lower gold production.
Operating profit decreased from R41 million (US$7 million) to a loss of R4
million (US$1 million) in the June quarter due to the decrease in gold
production. Capital expenditure decreased by 21 per cent to R48 million (US$7
million) for the quarter mainly due to lower expenditure at 4 sub-vertical
shaft.
Initiatives implemented to increase the mining grade are showing positive
results and gold production for the September quarter is forecast to improve
before returning to more historic levels in the December quarter. As a result
cash costs should improve but will be dependent on the outcome of the wage
negotiations.
Beatrix
June 2005 March 2005
Gold produced - 000`ozs 163.2 153.5
Yield - underground - g/t 5.6 5.2
- combined - g/t 5.6 4.8
Total cash costs - R/kg 78,010 81,064
- US$/oz 380 424
Gold production at Beatrix increased by 6 per cent from 153,500 ounces in the
March quarter to 163,200 ounces in the June quarter. Underground ore volumes
increased slightly from 897,000 tons in the March quarter to 910,000 tons in
the June quarter, mainly due to increased sweepings during the quarter. The
overall yield increased by 17 per cent quarter on quarter from 4.8 to 5.6 grams
per ton. This increase in yield was due to improved quality mining at 1, 2 and
3 shafts (North and South sections) and more volume from the higher grade zone
5 area at 4 shaft (West section).
Also, no surface rock dump material was milled in the June quarter due to the
decision to stop treatment of low grade surface dumps. Increased sweepings
volumes and the introduction of new mining cycles to facilitate dry sweepings
resulted in increased recovery rates. Continued focus on quality issues such as
reduced water usage, stope width control and increasing sweepings volumes from
old gold and backlog areas continue. The logistics project at West shaft made
further progress during the June quarter with only one level still to be
completed. However, ground control problems are being experienced at 20 level.
Operating costs increased 2 per cent to R411 million (US$64 million) in line
with the increase in underground volumes.
However, total cash costs decreased by 4 per cent to R78,010 per kilogram
(US$380 per ounce) from R81,064 per kilogram (US$424 per ounce) in the March
quarter due to the increased production and the continued strict control on
overall costs. The higher rand gold price, together with the above mentioned
factors, resulted in Beatrix recording an operating profit of R39 million (US$6
million) in the June quarter, compared with a loss of R8 million (US$1 million)
last quarter.
Capital expenditure was virtually unchanged quarter on quarter at R52 million
(US$8 million). The majority of this expenditure was spent on underground
development to increase flexibility and hydropower at 3 shaft.
Gold production for the September quarter should be lower than the June quarter
as haulage access problems at 20 level, 4 shaft are being encountered. Smectite
swelling has resulted in the closure of the haulage preventing access to the
stoping horizon. The actions that have been put in place to open up the haulage
will restrict mining from these stoping areas for approximately eight weeks.
The threat of stay- aways and the outcome of wage negotiations could also
affect production levels and costs in the September quarter.
International operations
Ghana
Tarkwa
June 2005 March 2005
Gold produced - 000`ozs 199.1 185.0
Yield - Heap Leach - g/t 1.0 0.9
Yield - CIL Plant - g/t 1.7 1.6
Total cash costs - US$/oz 240 226
Tarkwa`s gold production increased by 8 per cent from 185,000 ounces in the
March quarter to 199,100 ounces in the June quarter, slightly above forecast
due to out performance from the heap leach plant. The heap leach operation
contributed 135,700 ounces, up 10,000 ounces from the previous quarter and the
CIL plant contributed some 63,400 ounces, an increase of 4,100 ounces on the
previous quarter, reflecting the second full quarter of CIL plant production.
A total of 5.4 million tons of ore was processed during the quarter. The CIL
plant processed 1.2 million tons at a yield of 1.72 grams per ton, while ore
stacked on the leach pads was 4.2 million tons at a head grade of 1.29 grams
per ton, compared with 1.16 grams per ton in the March quarter. The increase in
grade was in line with expectation; with March`s grade being below expectation
due to mining constraints in the higher grade pits. The increase in heap leach
gold production versus the previous quarter reflects the larger amount of
recoverable gold placed on the heaps during the quarter due to the increase in
grade, the slight increase of 154,000 tons placed on the heaps and
metallurgical adjustments undertaken earlier in the year. Gold-in-process
release during the period at 6,000 ounces was similar to the March quarter.
The tons mined increased by 0.75 million tons for the quarter to 21.9 million
tons breaking the previous quarter`s record, reflecting ongoing optimisation of
the new mining fleet. The stripping ratio decreased from 3.3 to 3.2 but is
still being kept above the planned 2.8 for the year in order to increase mining
flexibility. Mining costs were US$0.81 per ton for the quarter compared with
US$0.73 per ton last quarter reflecting the increase in the maintenance cost of
the fleet as stipulated in the MARC (Maintenance and Repair Contracts) due to
the number of hours the units have been operating, and the increasing cost of
consumables such as diesel. A diesel hedge has been put in place at Tarkwa and
Damang to cap the diesel fuel cost for the next twelve months and provides a
cap on global diesel prices beyond US$0.45/litre, which approximates a Brent
crude oil price of around US$56 per barrel (bbl). A US$10/bbl increase in
global oil prices would result in a US$4 per ounce increase in total cash costs
at the Ghanaian operations.
Operating costs at US$48 million (R306 million), including gold-in-process
adjustments, were US$6 million higher than the previous quarter, reflecting the
increased mining and process volumes, increases in the price of consumables
such as cyanide, diesel, crusher and mill steel liners and the maintenance
costs of the fleet. Operating cost per ton treated was US$8.73 per ton as
against US$7.90 per ton in the March quarter, reflecting these increased costs.
Total cash costs at US$240 per ounce compare with the March quarter`s US$226
per ounce. This level reflects the increase in commodity prices and the fleet
maintenance cost.
Operating profit at US$37 million (R239 million) was the same as in the
previous quarter, with the increased gold production offsetting the increase in
costs. The average gold price received was US$428 per ounce, US$2 per ounce
below the previous quarter. Net earnings for the quarter decreased from US$28
million (R171 million) to US$18 million (R116 million) as a result of the
one-off US$11 million deferred tax release in the March quarter, which resulted
from a reduction in the Ghanaian company tax rate.
The surge in global commodity prices and its impact on input costs remains a
concern at this operation particularly. The increasing productivity of the new
mining fleet has been key in offsetting many of the increased diesel, tyre and
steel consumable price impacts to date. Initiatives that have been reported
previously continue to be expanded to seek both supply chain and consumption
optimisation.
Capital expenditure increased from US$10 million (R57 million) in the previous
quarter to US$16 million (R101 million) in the June quarter. The majority of
expenditure was spent on the construction of heap leach pads at both the North
and South facilities.
Gold production and unit costs for the September quarter are expected to be
similar to that of the June quarter, subject to Gold-in-process movements which
remain difficult to predict.
Damang
June 2005 March 2005
Gold produced - 000`ozs 58.2 53.9
Yield - g/t 1.4 1.3
Total cash costs - US$/oz 340 346
Gold production increased from 53,900 ounces during the March quarter to 58,200
ounces in the June quarter. This is directly attributable to the increase in
feed grade to the plant from 1.44 grams per ton in the previous quarter to 1.54
grams per ton this quarter. The increase in grade resulted from the increase in
ore mining in the new pits against treatment of lower grade stockpiles. Mill
throughput for the quarter was steady at 1,262,000 tons compared with 1,257,000
in the March quarter.
Total tons mined increased from 3.12 million tons to 3.81 million tons as
planned, at a strip ratio of 3.44. Mining operations continued in the Amoanda
and Juno 2SE pits, with ore tonnages mined increasing from 459,000 tons in the
previous quarter to 858,000 tons in the June quarter, at an average grade of
1.63 grams per ton compared with 1.43 grams per ton in March. These pits are
the main source of oxide feed to the plant, although towards the end of the
quarter the Juno 2SE pit was moving into the deeper fresh ore zone. The
permitting process for the Tomento pit has been completed and this pit will
provide an additional source of oxide feed in the new quarter.
Operating costs, including gold-in-process adjustments, increased to US$20
million (R125 million) from US$18 million (R109 million) in the March quarter
reflecting higher tonnages mined, an increase in contract mining costs and
haulage costs associated with the increased distance between the Amoanda pit
and the plant. Cost per ton milled increased from US$13.27 to US$15.52. Total
cash costs reduced slightly to US$340 per ounce. A diesel hedge has been put in
place to cap the diesel fuel cost for the next twelve months.
Operating profit increased marginally to US$5 million (from R27 million to R35
million), the increased revenue being offset largely by the increase in
operating costs. The average gold price received increased quarter on quarter
from US$425 per ounce to US$431 per ounce.
Capital expenditure incurred during the quarter amounted to US$3 million (R17
million). The majority of this expenditure was incurred in the raising of the
tailings dam, the resettlement and compensation associated with the
establishment of the Tomento pit, the Damang pit cutback feasibility study and
the Abosso Deeps feasibility study.
Gold production and costs are expected to be similar for the September quarter.
Australia
St Ives
June 2005 March 2005
Gold produced - 000`ozs 143.1 154.1
Yield - Heap Leach - g/t 0.5 0.6
Yield - Milling - g/t 3.5 3.4
Total cash costs - A$/oz 450 451
- US$/oz 348 350
Gold production for the quarter was 143,100 ounces, 7 per cent down from last
quarter`s 154,100 ounces. This decrease largely reflects the closure of the old
mill before commencement of the quarter. The Lefroy mill ramped up to full
production and achieved design throughput for the quarter, producing 121,000
ounces, though a breakdown in the gold elution system at quarter end actually
resulted in a further 7,000 ounces being accumulated in this system. The
contribution from the heap leach operation was similar to the March quarter at
10,000 ounces. Clean-up around the old mill accounted for the remaining gold
production.
Total tons processed during the quarter amounted to 1.70 million, a decrease of
16 per cent from the March quarter due to the closure of the old mill. During
the March quarter the old mill and the new Lefroy mill ran concurrently during
the commissioning of the latter. For the quarter, 1,101,000 tons were processed
through the Lefroy mill, compared with 840,000 tons last quarter. Heap leach
operations treated 597,000 tons of ore, up 7 per cent from last quarter.
The average head grade processed at 2.9 grams per ton was marginally above the
March quarter`s 2.7 grams per ton.
Yield at the heap leach operation was 0.5 grams per ton compared with 0.6 grams
per ton last quarter, while the yield at the Lefroy mill at 3.5 grams per ton
was higher than the 2.7 grams per ton in the previous quarter. The initial
stages of commissioning of Lefroy in the March quarter involved processing of
low grade ores.
While the Lefroy mill achieved design capacity during the quarter, operations
have been interrupted and recovery affected by some shortcomings in the plant
piping and materials handling systems. These problems are typical of a new
plant and rectification of these issues was largely completed during the
quarter, with benefits seen towards the end of the period. Continued emphasis
on the gravity and carbon circuits in the September quarter is expected to
result in additional recovery improvements.
Mining operations produced 1.64 million tons of ore during the quarter as
planned, an increase of 27 per cent on the previous quarter`s 1.29 million
tons. Open pit head grade improved from 1.51 to 1.64 grams per ton quarter on
quarter as planned. Waste movement was reduced and will reduce somewhat further
in the September quarter, as the target ore zones become exposed, particularly
in the Mars open pit. During the quarter, 4.5 million tons of open pit ore and
waste were mined at an average strip ratio of 3.1 (March quarter: 5.6 million
tons at a strip ratio of 6.1).
Overall the underground mining operations performed to expectation, producing
538,000 tons of ore at 5.6 grams per ton (March 501,000 tons at 5.5 grams per
ton). A reduction in ore volumes from Junction, at which mining was completed
in May, was offset by increased output from Argo and the Leviathan complex.
Leviathan continued to exceed expectations, while improvements at Argo resulted
in its best quarter to date.
Operating costs, including gold-in-process adjustments, decreased from A$72
million (R331 million) to A$67 million (R327 million), reflecting the lower
volumes milled but also improvements in unit costs, particularly on the
underground mines. Total cash costs at A$450 per ounce (US$348 per ounce) were
unchanged quarter on quarter and remained considerably beyond our target of
below A$400 per ounce.
This was primarily due to the milling of high coststockpiles (GIP charges
contributed A$31 per ounce), some costs associated with the ramp up of the
Lefroy mill and a further A$24 per ounce due to the write-down of stockpile
carrying values and the costs associated with selling the old mill. By quarter
end underlying cost performance of the mining operations were on near term
target.
Operating profit at A$13 million (R65 million) in the June quarter equalled
that of the March quarter despite the decrease in gold production. This was due
to the closure of the high-cost old mill at the end of last quarter, plus an
improved performance from the underground mines, and despite the additional
charges referred to above.
Capital expenditure for the June quarter amounted to A$16 million (R86 million)
compared with A$15 million (R72 million) in the March quarter. This increase
was driven by an increase in development mainly at Leviathan and the final
costs for the Lefroy mill.
