Full-year earnings drop 77% after reducing the boo
Full-year earnings drop 77% after reducing the book value of some mines
Gold Fields has a war chest of R3.4bn to spend
August 5, 2005
By Nicky Smith
Johannesburg - Gold Fields had R3.4 billion to use either to buy mines or to fund the development of new mines, financial director Nick Holland said yesterday.
Holland said it made sense for an unhedged gold producer, one which sold gold for cash rather than at a fixed price for delivery in the future, to have a cash buffer. This was also why the company had not given the cash back to shareholders in the form of a dividend.
The company reported full-year results yesterday, which showed the group`s earnings had dropped 77 percent after reducing the book value of some of its mines and the costs of fighting Harmony`s hostile takeover bid.
Ian Cockerill, Gold Fields` chief executive, said recently the Driefontein mine had become the first gold mine in history to produce 100 million ounces of gold.
He said Driefontein was not like any other mine in the world and explained that mining companies were pleased when they found a deposit that would produce 2 million ounces.
`Bearing in mind that Driefontein still has another 20 million ounces [in the current mining plan] this is one hell of an operation,` Cockerill said.
`This is the first time that any gold mine anywhere in the world has produced this amount of gold.`
Cockerill said gold companies were struggling globally to find new new deposits to replenish the reserves that were mined daily.
Gold mines have two options to replace mined ounces: acquisitions or discovering a new deposit that can be mined.
Gold Fields had an active exploration portfolio, and John Munro, Gold Fields` head of international operations, said Gold Fields currently had two due diligence teams `running a ruler` over two possible acquisitions.
Munro said the type of projects being evaluated ranged from `very large single assets` to `feasibility assets` and `small portfolios of assets`.
Munro would not comment on whether either of these two deals were in Russia. Holland did not allude to anything new about the relationship between Gold Fields and its largest shareholder, Norilsk Nickel. He said the two companies continued to look for ways to work together.
Gold Fields was expected to make a decision about going ahead with its debut in South America with the Cerro Corona copper and gold project in Peru `before Christmas time`, Cockerill said.
Cerro Corona is expected to have a 15-year life and will produce 150 000 ounces of gold a year and 27 000 tons of copper.
Another project the company is actively working on to see whether it can be developed into a mine is the Essakan project in Burkina Faso.
`We have just started looking at the numbers for Essakan ... our objective is to get to prefeasibility by the end of the year,` Cockerill said.
If the study found there was enough water to support the running of a mine, `we would move next year into a full-blown feasibility study`. This is one step away from making a decision to build a mine.
Gold Fields was on track to meet its target of adding 1.5 million ounces from offshore mines by 2009
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