| Thu 26 Jan 2006, 8:00 | | Gold Fields Limited - Quarterly Results |
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GFI
GOGOF
Gold Fields Limited - Quarterly Results
Gold Fields Limited
Incorporated in the Republic of South Africa
Registration number 1968/004880/06
Share code: GFI
Issuer code: GOGOF
ISIN - ZAE 000018123
Q2 F2006
Quarter ended 31 December 2005
News Release Q2 F2006 Results
-Unaudited-
Increased production and a higher price results in
a six fold increase in earnings
JOHANNESBURG. 26 January 2006 - Gold Fields Limited (NYSE & JSE: GFI)
Today announced December 2005 quarter net earnings of R262 million
compared with R39 million in the September 2005 quarter and
earnings of R67 million for the December quarter of 2004.
In US dollar terms net earnings for the December 2005
quarter equated to US$40 million compared with US$6 million in
the September 2005 quarter and earnings of US$11 million for
the December quarter of 2004. Net earnings excluding gains
and losses on financial instruments and foreign debt
net of cash and exceptional items were R275 million
(US$42 million) for the December 2005 quarter compared
with R44 million (US$7 million) in the September
quarter.
December 2005 quarter highlights:
* Attributable gold production increased
5 per cent to 1,040,000 ounces.
* Total cash costs at R71,659 per kilogram (US$341 per ounce)
2 per cent lower than the September quarter.
* Total cash costs at R66,007 per kilogram (US$314 per ounce)
when calculated in line with local peers.
* Operating profit increased by 73 per cent from R554 million
(US$85 million) to R958 million (US$147 million).
* Cerro Corona and Bolivar deals keep international
growth strategy on track.
* Interim dividend declared of 40 SA cents per share payable
20 February 2006.
Ian Cockerill, Chief Executive Officer of Gold Fields said:
"As expected Gold Fields posted a strong December quarter
with, in particular, the South African operations delivering
a healthy 8 per cent improvement in production, while maintaining
a strong grip on costs as evidenced by a 4 per cent decline in
total cash costs.
During the quarter Gold Fields made significant progress towards
achieving its international growth objectives with the conclusion
of the Cerro Corona acquisition in Peru, and approval early
in January of the Bolivar acquisition by the shareholders
of that company.
Gold Fields is in good shape on all fronts and has started
2006 with renewed energy and commitment to deliver value
for shareholders.
The improvement in the gold price provides an opportunity to
secure enhanced value from our operations."
Stock data
Number of shares in issue
- at end December 2005 493,312,693
- average for the quarter 492,600,779
Free Float 80%
ADR Ratio 1:1
Bloomberg / Reuters GFISJ / GFLJ.J
JSE Limited - (GFI)
Range - Quarter ZAR86.60 - ZAR111.89
Average Volume - Quarter 1,800,664 shares / day
NYSE - (GFI)
Range - Quarter US$12.92 - US$17.90
Average Volume - Quarter 1,395,152 shares / day
the complete gold company
Salient features
South African Rand
Six months to Quarter
Restated Restated
Dec Dec Dec Sept Dec
2004 2005 2004 2005 2005
kg Gold produced* 63,916 63,234 32,599 30,892 32,342
R/kg Total cash costs 65,700 72,202 64,921 72,768 71,659
000 Tons milled 22,866 23,977 11,823 11,888 12,089
R/kg Revenue 83,381 96,526 84,872 91,669 101,184
R/ton Operating costs 205 208 198 207 210
Rm Operating profit 1,093 1,512 637 554 958
% Operating margin 19 23 22 18 28
Rm 156 301 67 39 262
SA Net earnings
c.p.s. 31 61 13 8 53
Rm 121 297 32 36 261
Headline earnings
SA
c.p.s. 24 60 6 7 53
Rm Net earnings excluding 69 318 87 44 275
gains and losses on
SA financial instruments
c.p.s and foreign debt net 13 65 17 9 56
of cash and exceptional
items
Salient features
United States Dollars
Quarter Six months to
Restated Restated
Dec Sept Dec Dec Dec
2005 2005 2004 2005 2004
Gold produced* (000) oz 1,040 993 1,048 2,033 2,055
Total cash costs $/oz 341 347 330 344 327
Tons milled 000 12,089 11,888 11,823 23,977 22,866
Revenue $/oz 482 437 431 460 416
Operating costs $/ton 32 32 32 32 33
Operating profit $m 147 85 103 232 175
Operating margin % 28 18 22 23 19
$m 40 6 11 46 25
Net earnings
US c.p.s. 8 1 2 9 5
$m 40 6 6 46 20
Headline earnings
US c.p.s. 8 1 1 9 4
Net earnings
excluding $m 42 7 14 49 11
gains and losses
on financial
instruments and US c.p.s. 9 1 2 10 2
foreign debt
net of cash
and exceptional
items
*Attributable - All companies wholly owned except for Ghana (71.1%).
Note - restated figures are due to the adoption of IFRS 2,
share based payments.
Health and safety
We regret to report eight fatalities during the December quarter with six of
these accidents due to falls of ground and seismicity. A conveyor belt accident
claimed the life of an employee at Tarkwa in November 2005. The Australian
operations continued being fatality free this quarter. The remaining fatalities
were at the South African operations. The fatal injury frequency rate was 0.21,
which is lower than the previous quarter"s figure of 0.27. The lost day injury
frequency rate improved from 12.59 to 11.94, the serious injury frequency rate
regressed from 5.9 to 7.2 and the days lost frequency rate also regressed from
348 to 360. These rates are still unacceptably high and management is
continuing to actively review all current safety initiatives and seeking areas
of improvement through serious incident review processes, so as to attain the
long-term objective of achieving the Ontario safety standards on all of our
mines.
Financial review
Quarter ended 31 December 2005 compared with quarter ended 30 September 2005
Revenue
Attributable gold production increased by 5 per cent to 1,040,000 ounces in the
December 2005 quarter, compared with 993,000 ounces achieved in the September
2005 quarter. Production at the South African operations was 698,000 ounces,
compared with 647,000 in the September quarter, an increase of 8 per cent.
Attributable production at the international operations was in line with the
previous quarter at 342,000 ounces.
At the South African operations, Driefontein performed largely as expected with
the slightly lower underground grade offset by improved underground ore
volumes. As predicted in the previous quarter, Kloof and Beatrix experienced a
much improved performance, mainly due to increased underground volumes. Kloof"s
underground yield was marginally higher at 8.8 grams per ton, while the yield
at Beatrix was unchanged at 5.2 grams per ton.
At the international operations the decline in attributable production at
Tarkwa and Agnew was mostly offset by the increase at St Ives and Damang.
Tarkwa declined by 6,000 ounces to 118,000 ounces (attributable) mainly due to
lower mill throughput and an increase in gold-in-process at the heap leach
facilities. At Agnew, mining volumes and yields at both surface (Songvang) and
underground (Waroonga complex - Kim and Main Lode) operations decreased due to
the transition from oxide to primary reef at Songvang and unsustainably high
yields experienced at the Kim mine in the previous quarter. St Ives increased
gold production by 6,000 ounces to 126,000 ounces mainly due to higher treated
volumes. Damang increased production from 41,000 ounces to 43,000 ounces
(attributable) due to higher grade feed to the plant as a result of fresh ore
replacing lower grade stockpiles.
The US dollar gold price increased by 10 per cent from US$437 per ounce in the
September quarter to US$482 per ounce in the December quarter. The rand
averaged R6.53 against the US dollar, virtually unchanged from the September
quarter. The resultant rand gold price increased 10 per cent, from R91,669 per
kilogram in the September quarter to R101,184 per kilogram in the December
quarter.
The increase in production, together with the increase in the rand gold price
achieved, resulted in revenue increasing from R3,023 million (US$464 million)
to R3,479 million (US$534 million) this quarter.
Operating costs
Operating costs for the December 2005 quarter, at R2,542 million (US$390
million), increased by 3 per cent when compared with the September quarter"s
R2,457 million (US$377 million).
The majority of this increase was at the South African operations where costs
increased by R61 million (US$10 million) from R1,672 million (US$256 million)
to R1,732 million (US$266 million), when compared with the September quarter.
The increase at the South African operations was due to an increase in mining
volumes, as shifts were lost last quarter as a result of the industrial action
in August at the time of the wage negotiations. The 8 per cent increase in
production at the South African operations resulted in total unit cash costs at
these operations decreasing by 4 per cent.
Costs at the international operations, including gold-in- process changes, were
R789 million (US$121 million), 1 per cent below the R797 million (US$122
million) incurred in the September quarter. Tarkwa"s costs were slightly lower
in line with the lower production. Damang"s costs were lower in the December
quarter mainly due to the decrease in the gold-in-process charge, as fresh ore
replaced stockpile feed. At St Ives operating costs increased in line with the
increased production. Agnew"s costs were unchanged, the lower mining volumes
offset by the increased mining costs at Songvang open pit due to increased ore
hardness and mining depth. Exchange rates had no significant impact when
translating from local currencies in Australia and Ghana, into South African
rand - the reporting currency.
Operating margin
The net effect of the movements in revenue and costs, after taking into account
gold-in-process changes, was an operating profit of R958 million (US$147
million). This is 73 per cent above the R554 million (US$85 million) achieved
in the September quarter. The Group margin increased from 18 per cent last
quarter to 28 per cent in the December quarter, while the margin at the South
African operations more than doubled from 9 per cent to 21 per cent. The margin
at the international operations increased from 33 per cent to 39 per cent
quarter on quarter.
Amortisation
Amortisation increased from R353 million (US$54 million) in the September
quarter to R376 million (US$58 million) in the December quarter. This increase
was mainly due to the increase in production experienced at the South African
and Australian operations during the quarter.
Other
Net interest and investment income after taking into account interest paid,
increased from R1 million (US$- million) in the September quarter to R17
million (US$3 million) for the December quarter largely due to enhanced returns
on equity linked rehabilitation investments.
The loss on financial instruments of R19 million (US$3 million) compares with a
loss of R9 million (US$1 million) in the September quarter. Included this
quarter is a marked to market gain on US dollar/rand forward purchase contracts
of R18 million (US$3 million), offset by an R8 million loss (US$1 million) on
the US dollar/Australian dollar call options and a loss on unexpired diesel
call options in Ghana of R14 million (US$2 million). Realised this quarter was
a loss of R14 million (US$3 million) resulting from the maturity on 1 December,
and rollover to 5 June 2006, of the US$30 million US dollar/rand forward
purchase which offsets the marked to market gain referred to above. More
details on these financial instruments are given on page 15 of this report.
Exploration expenditure
Exploration expenditure decreased from R66 million (US$10 million) in the
September quarter to R54 million (US$8 million) in the December quarter -
please refer to the Exploration and Corporate Development section for more
detail.
Taxation
Taxation for the quarter amounted to R200 million (US$31 million) compared with
R45 million (US$7 million) in the September quarter. The tax provision includes
normal and deferred taxation on all operations together with royalties at the
international operations. The increase is in line with the increased operating
profit.
Earnings
Net profit attributable to ordinary shareholders amounted to R262 million
(US$40 million) or 53 SA cents per share (US$0.08 per share), compared with R39
million (US$6 million) or 8 SA cents per share (US$0.01 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 R261 million (US$40 million) or 53
SA cents per share (US$0.08 per share), compared with earnings of R36 million
(US$6 million) or 7 SA cents per share (US$0.01 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 R275 million
(US$42 million) or 56 SA cents per share (US$0.09 per share), compared with
earnings of R44 million (US$7 million) or 9 SA cents per share (US$0.01 per
share) reported last quarter.
Cash flow
Cash flow from operating activities for the quarter was R557 million (US$90
million), which was nearly double the operating cash flow generated in the
September quarter of R303 million (US$47 million). This was mainly due to the
increase in production and the higher gold price received. The increased profit
before tax and exceptional items of R498 million (US$76 million) was partially
offset by an outflow of working capital of R266 million (US$41 million) due to
timing of creditors payments.
Capital expenditure amounted to R402 million (US$62 million) compared with R325
million (US$50 million) in the September quarter. Expenditure at the South
African operations increased R36 million (US$6 million) to R169 million (US$26
million). A significant portion of this expenditure was directed at the major
projects, with R26 million (US$4 million) at 1 tertiary and 5 shaft at
Driefontein, R9 million (US$1 million) at Kloof 4 shaft, R10 million (US$2
million) at Kloof 1 shaft pillar extraction and R33 million (US$5 million) at
Beatrix 3 shaft.
At the Ghanaian operations, capital expenditure amounted to R104 million (US$18
million) with R24 million (US$4 million) spent on the new heap leach pads
project at Tarkwa and R27 million (US$4 million) on the Damang main pit
cutback. This compares with total expenditure of R72 million (US$11 million) in
the September quarter.
The Australian operations incurred capital expenditure of R119 million (A$24
million) compared with R111 million (A$22 million) in the September quarter.
Expenditure at St Ives of R86 million (A$18 million) included development costs
at Argo and Leviathan underground. At Agnew, the majority of the R33 million
(A$7 million) expenditure was spent on development. Included in capital
expenditure was ongoing exploration expenditure at both operations of R36
million (A$7 million).
Major projects are still forecast to be in line with approved votes.
Proceeds on disposal of various Group wide mining assets amounted to R4 million
(US$1 million) for the quarter. Net investments purchased amounted to R27
million (US$4 million) and includes the purchase of 2.5 million shares in Avoca
Resources Limited (R5 million/US$1 million) and participating in the Western
Areas Gold Mining Company Limited rights issue (R22 million/US$3 million).
Financing activities include loan repayments to minorities of R67 million
(US$10 million) arising from distributions from Gold Fields Ghana Limited and
shares issued to the value of R73 million (US$11 million) as a consequence of
take ups under the employee share options plan, resulting in a net financing
inflow of R6 million (US$1 million) for the quarter.
Net cash inflow for the quarter was R134 million (US$25 million). After
accounting for a positive translation adjustment of R4 million, the translation
adjustment in US dollar was negative $6 million, the cash balance at the end of
December was R2,937 million (US$461 million). The balance at the end of
September was R2,800 million (US$442 million).
Detailed and operational review
Group overview
Attributable gold production for the December 2005 quarter increased 5 per cent
to 1,040,000 ounces when compared with the September quarter. Production from
the South African operations at 698,000 ounces accounted for 67 per cent of the
Group"s total attributable production, compared with 647,000 ounces or 65 per
cent last quarter.
At the South African operations, gold production increased 8 per cent compared
with the previous quarter. Driefontein was unchanged quarter on quarter at
290,000 ounces. Kloof increased significantly from 218,000 ounces to 253,000
ounces, mainly due to increased underground volumes as volumes were impacted by
the strike in the previous quarter. The increase at Beatrix of 16,000 ounces
returns production to more historic levels. Operating profit at the South
African operations increased from R170 million (US$26 million) to R460 million
(US$71 million), mainly as a consequence of the increased gold production and
higher gold price achieved.
Development at the South African operations will be increased in the March and
June quarters in order to increase mining flexibility. This is to ensure that
current levels of performance are maintained or improved upon where this is
possible. The cost of this development will be in the region of R30 million
(US$5 million) per quarter of which about one third will be capitalised. The
level of flexibility gained over the next two quarters will be maintained into
the future.
The Ghanaian operations showed a 2 per cent decrease in attributable gold
production to 161,000 ounces. Damang was slightly higher than the previous
quarter offset by the decrease at Tarkwa which was due to lock-up in the North
heap leach pads which are on fourth lifts and a slower than anticipated release
at the new Blue Ridge south pads exacerbated by high rainfall during the
quarter. Ghana contributed operating profit of R280 million (US$43 million), a
35 per cent increase when compared with the September quarter.
Production from the Australian operations was similar quarter on quarter at
181,000 ounces. The decrease in production at Agnew of 7,000 ounces was due to
lower grades. At St Ives the increase of 6,000 ounces was due to increased
volumes processed through the Lefroy mill as a consequence of higher
underground mining volumes. Operating profit from the Australian operations
increased from R177 million (A$36 million, US$27 million) to R216 million (A$44
million, US$33 million), primarily as a result of the higher gold price which
increased from an average of A$558 per ounce to A$649 per ounce for the
December quarter.
The international operations contributed R497 million (US$76 million) or 52 per
cent of the total operating profit of R958 million (US$147 million). This
compares with R384 million (US$59 million) or 69 per cent of the total
operating profit of R554 million (US$85 million) last quarter.
South African Operations
Project 500 was initiated in September 2003 to increase revenue and reduce
costs through two sub-projects i.e. Project 400 and Project 100. These projects
have proved successful and led to additional projects - Project 100+ and
Project Beyond as detailed below.
Project 400
Project 400 was aimed at improving revenue such that an additional R400 million
(US$60 million) per annum could be generated on a sustainable basis. This was
to be achieved through a basket of productivity initiatives; by eliminating
non-contributing production and replacing low-grade surface material with
higher margin underground material - all aimed at improved quality volumes. In
financial 2005 this resulted in improved yields, in line with the life of mine
grades for each of the South African operations, as reflected in the following
table.
Sep Dec
Year/Quarter F2004 F2005 2005 2005
Driefontein:
Life of mine head grade as per the
2003, 2004 and 2005 annual report 8.7 8.1 8.0 8.0
Life of mine head grade adjusted for
estimated metallurgical recoveries 8.4 7.8 7.8 7.8
Driefontein (underground yields achieved) 8.1 8.3 8.1 7.9
Kloof:
Life of mine head grade as per the
2003, 2004 and 2005 annual report 9.8 10.5 9.7 9.7
Life of mine head grade adjusted for
estimated metallurgical recoveries 9.5 10.2 9.4 9.4
Kloof (underground yields achieved) 9.0 9.1 8.7 8.8
Beatrix:
Life of mine head grade as per the
2003, 2004 and 2005 annual report 5.1 5.5 5.4 5.4
Life of mine head grade adjusted for
estimated metallurgical recoverie 4.9 5.3 5.2 5.2
Beatrix (underground yields achieved) 4.6 5.0 5.2 5.2
Project Beyond and Project 100+
Project Beyond, initiated in 2004, is a procurement (sourcing) initiative
targeting savings of between R200 million and R300 million (US$33 million to
US$50 million) over three years, i.e. around 10 per cent of the amount expended
on materials, services and capital expenditure at the South African operations.
Total expenditure on these items is approximately R2.7 billion (US$450
million). The project delivered R101 million (US$16 million) of contract
savings on historic baseline expenditure during the 2005 financial year through
addressing commodities such as grinding media, foodstuffs, mill liners, ore
transport, support, bearings, engineering repairs, and lubricants. The savings
are realised as these contracts are utilised by the mining operations i.e.
largely during the 2006 financial year.
To date a total R1.1 billion (US$180 million) of spend has been reviewed as
part of Project Beyond. Contractual savings to date are R127 million (US$20
million). R61 million (US$10 million) has been realised in cost savings, of
which R31 million (US$5 million) applies to the 2006 financial year. An
additional R29 million (US$ 5 million) in cost savings are estimated to impact
cash flow before the end of financial 2006. During the past year general
inflation pressures were experienced on total materials and services
expenditure. Project Beyond successfully mitigated the impact of these
increases on costs.
Project Beyond is targeting a further R40 million (US$7 million) contractual
savings per annum at the South African operations during the 2006 financial
period. Most of the savings on these commodities will be realised post
financial 2006.
During the past quarter focus has been on a range of around 20 commodities
including, diesel engine repairs, hoppers, ventilations pipes, labour hire,
steel wire ropes, lime, electric motors and explosives. A proportion of future
savings are of the nature of reduced cost of ownership i.e.
they arise out of lower operating costs over the life of the commodity. These
savings, while enduring, are realised over a more extended period.
As attention is being given to a more global and integrated approach to supply
and sourcing, likely benefits are being identified in the international
operations of Australia, Ghana and the Peruvian Cerro Corona
project.Preliminary indications are that savings of around US$20 million per
annum may be achieved.
The Project 100+ initiative continued during the December quarter. Attention
was given to projects focussed on labour optimisation, transport, electricity
demand and pump management. Expected benefits of up to R200 million
(US$33 million) are expected to flow during 2006 and 2007.
Driefontein
December September
2005 2005
Gold produced - 000"ozs 290.1 289.8
Yield - underground - g/t 7.9 8.1
- combined - g/t 5.4 5.6
Total cash costs - R/kg 71,935 69,872
- US$/oz 343 333
Gold production is in line with the previous quarter at 290,100 ounces. As
forecast, the underground grade decreased from 8.1 grams to 7.9 grams per ton
during the December quarter. Area mined increased by 8 per cent quarter on
quarter, consequently increasing underground tons milled from 989,000 to
1,029,000 for the quarter. Surface tons increased by 5 per cent to 655,000 tons
at a slightly lower yield.
Operating costs increased 3 per cent from R656 million (US$101 million) to R675
million (US$104 million) as a result of savings achieved in the previous
quarter on the wage bill due to the strike and due to a conscious increase in
complements during the current quarter so as to create a platform for increased
production levels in the future. As a result total cash costs increased 3 per
cent in rand terms from R69,872 per kilogram to R71,935 per kilogram. In US
dollar terms, total cash costs increased by 3 per cent from US$333 per ounce to
US$343 per ounce. Operating profit increased by 41 per cent from R168 million
(US$26 million) in the September quarter to R237 million (US$36 million) in the
December quarter, mainly as a result of an improvement in the gold price.
Capital expenditure increased from R47 million (US$7 million) to R61 million
(US$9 million) for the December quarter. Largely due to the timing of
expenditure on various projects.
Gold production and costs for the March quarter are expected to be similar to
the December quarter.
Kloof
December September
2005 2005
Gold produced - 000"ozs 252.6 218.4
Yield - underground - g/t 8.8 8.7
- combined - g/t 8.3 7.8
Total cash costs - R/kg 79,369 88,295
- US$/oz 378 421
Gold production at Kloof increased by 16 per cent from 218,400 ounces to
252,600 ounces in the December quarter. This was due to higher underground
tonnage as more shifts were worked compared with the previous quarter resulting
from the impact of the strike in the previous quarter. Underground yields
improved again this quarter as a result of actions undertaken to address the
grade decline highlighted in the previous quarters. Surface yields improved as
a result of the closure and clean up of No. 3 plant which will continue in the
March quarter.
The operating costs at R648 million (US$99 million) for the quarter increased
by 4 per cent compared with the previous quarter"s cost of R625 million (US$96
million). This was due to increased production in this quarter. However, the
higher gold production and focus on reducing costs resulted in the total unit
cash cost decreasing by 10 per cent to R79,369 per kilogram, compared with the
R88,295 per kilogram in the September quarter. In US dollar terms total cash
costs decreased by 10 per cent to US$378 per ounce compared with the previous
quarter"s US$421 per ounce.
Operating profit improved to R145 million (US$22 million) for the quarter
compared with a loss of R4 million (US$1 million) in the September quarter.
Capital expenditure increased from R43 million (US$7 million) in the previous
quarter to R53 million (US$8 million) in the current quarter. This was mainly
due to increased expenditure at 4 sub vertical shaft and the 1 shaft pillar
project.
Gold production is expected to be lower in the March quarter and as a
consequence unit cash costs will be higher.
Beatrix
December September
2005 2005
Gold produced - 000"ozs 154.9 138.6
Yield - underground - g/t 5.2 5.2
Total cash costs - R/kg 81,984 87,152
- US$/oz 391 416
Gold production at Beatrix increased by 12 per cent from 138,600 ounces in the
September quarter to 154,900 ounces in the December quarter. This was due to a
12 per cent increase in underground volumes from 831,000 tons to 931,000 tons
in the December quarter. The overall yield remained constant at 5.2 grams per
ton quarter on quarter. The logistics project at the West section (4 shaft) to
alleviate the access tunnel ground control problems was completed as planned.
The mine reverted to historic levels of production following the industrial
action which took place during the previous quarter.
Operating costs quarter on quarter increased by 5 per cent from R391 million
(US$60 million) to R409 million (US$63 million) mainly due to the increased
production volumes.
Total cash costs per kilogram decreased by 6 per cent from R87,152 per kilogram
(US$416 per ounce) in the September quarter to R81,984 per kilogram (US$390 per
ounce) in the December quarter as a result of the higher gold production.
Beatrix posted an operating profit of R79 million (US$12 million) in the
December quarter compared with R6 million (US$1 million) in the September
quarter. This was mainly due to the increase in gold output and an increase of
10 per cent in the gold price received.
Capital expenditure at R55 million (US$8 million) was 25 per cent higher than
the September quarter mainly due to a conscious effort to maintain operational
performance at current levels, or better, for the long-term.
Gold production and costs for the March quarter are forecasted to be in line
with the December quarter.
International Operations
Ghana
Tarkwa
December September
2005 2005
Gold produced - 000"ozs 166.6 174.2
Yield - Heap leach - g/t 0.9 0.9
Yield - CIL plant - g/t 1.6 1.5
Total cash costs - US$/oz 282 277
Tarkwa processed a total of 5.2 million tons at an average yield of 1.0 gram
per ton, producing 166,600 ounces of gold in the December quarter. The 4 per
cent quarterly reduction in gold output was due mainly to changes in
gold-in-process at the heap leach facilities and lower volumes mined and
processed partially offset by increased output at the CIL plant. The heap leach
process contributed 111,000 ounces and the CIL plant 55,600 ounces. This
compares with 119,600 ounces and 54,600 ounces respectively in the previous
quarter.
Mining volumes decreased by 2 million tons to 22 million tons as a result of
rain interruptions and additional tons mined in the previous quarter to advance
the early completion of the heap leach pad expansions at the northern facility.
The high strip ratio was virtually unchanged at 3.36 and reflects the current
push backs at the Teberebie and Kotraverchy pits. Mining costs were US$0.96 per
total ton mined for the quarter compared with US$0.88 per total ton mined last
quarter and reflects the increase in fleet maintenance costs due to the
increasing number of hours the units have been operating and the increased cost
of diesel.
The CIL plant continues to perform in line with expectation and the quarterly
throughput was consistent at 1.1 million tons at an average yield of 1.55 grams
per ton. The difficulties reported previously with regard to the blending of
soft higher grade and hard medium grade ore has largely been resolved. Head
grades have been lower than planned with waste dilution from the Teberebie pit
being the primary contributor. Plans are in place to minimise this dilution
through a major cutback programme, thereby allowing for optimal digging on the
28 to 35 dipping reef horizons.
A total of 4.1 million tons at a head grade of 1.21 grams per ton was stacked
on the heap leach pads during the December quarter. The decrease in gold
produced from the heap leach pads of 8,600 ounces compared with the previous
quarter is mainly due to a lock-up of 6,400 ounces in GIP, compared with a net
GIP release of 1,400 ounces in the September quarter. This increase in GIP is
largely attributable to commencement of stacking on the fourth lift at the
North heap leach facility and a slower than anticipated release of the south
pads, exacerbated by the high rainfall during the quarter.
Operating costs at US$49 million (R322 million), including gold-in-process
adjustments, were US$0.6 million higher than that reported in the September
quarter, reflecting the increase in mining costs. Operating cost per ton
treated excluding GIP charges was US$9.57 per ton as against US$9.25 per ton in
the September quarter. Total cash costs at US$282 per ounce compare with the
September quarter"s US$277 per ounce.
Operating profit at US$34 million (R220 million) increased by US$6 million (R38
million) with the lower gold production being more than offset by the increase
in the average US$ gold price.
Capital expenditure increased from US$7 million (R47 million) in the September
quarter to US$11 million (R69 million) in the December quarter. The main areas
of capital expenditure are the construction of leach pads at the North and the
purchasing of mining equipment.
Gold production for the March quarter is expected to improve as stacking will
commence in February 2006 on the first lift of the newly constructed Phase 4
pads at the North heap leach facility and will continue on the first lift at
the new Blue Ridge pads at the South heap leach facility. Good progress has
been made during January in addressing the ore dilution in the Teberebie pit
and a slight increase in mill grade is expected. Cost pressure will continue as
higher stripping ratios are being planned to ensure mining flexibility.
Damang
December September
2005 2005
Gold produced - 000"ozs 60.2 57.2
Yield - g/t 1.4 1.3
Total cash costs - US$/oz 330 375
Gold production increased from 57,200 ounces during the September quarter to
60,200 ounces in the December quarter. This increase is mainly attributable to
the higher grade ore to the plant, which increased from 1.46 grams per ton to
1.52 grams per ton. The increase in grade resulted mainly from an increase in
the higher-grade oxide ore tonnages mined from the Tomento pit, which displaced
the lower grade stockpiled oxide tonnages fed to the plant during the previous
quarter. The fresh ore tonnages mined from the Amoanda pit, previously an oxide
ore source, replaced the higher-grade fresh ore tonnages mined from the Juno
2SE pit, which reached its final depth in the December quarter.
Mill throughput for the quarter at 1.3 million tons was similar to the
September quarter.
Total tons mined increased from 3.7 million tons to 3.9 million tons. Ore mined
for the quarter at 642,000 tons was lower than the previous quarter"s 742,000
tons. This was as a result of an increase in the stripping ratio to 5.05 from
4.02. The Tomento pits will remain the main sources of oxide feed to the plant
in the near future and the Amoanda pit remains the main fresh ore source to the
plant. The Juno 2SW pit, which is a southern extension to the Damang pit
cutback, is being developed and will be brought into production during this
financial year.
Operating costs, including gold-in-process adjustments, reduced to US$20
million (R128 million) from US$21 million (R138 million) in the previous
quarter. This was as a result of a lower gold-in-process charge, it being US$2
million lower than the previous quarter. Cost per ton milled decreased slightly
from US$14.34 to US$14.28. Total cash costs decreased from US$375 per ounce to
US$330 per ounce, reflecting the increase in ounces produced and the decrease
for the quarter in the gold-in-process charge.
Operating profit increased from US$4 million (R26 million) to US$9 million (R61
million), due to increases in both gold production and the US$ gold price.
Capital expenditure incurred during the quarter amounted to US$5 million (R35
million). The majority of this expenditure was incurred in mining the Damang
pit cutback.
During the quarter mining at the Damang pit cutback commenced on the east wall
utilising a second mining fleet as mining continued on the west wall.
Production to date is 12 per cent ahead of the plan, however the small quantity
of ore that was originally planned to be mined has not yet been realised due to
delaying the start on the east side of the pit to better fit the annual
tailings dam construction programme. The first ore is now scheduled to be mined
during the coming quarter.
Gold production is expected to decrease slightly in the March quarter as a
result of the depletion of the higher grade fresh ore B4 surface stockpile. The
African Mining Services Contract for mining at Damang over the next five years
is currently being finalised.
Australia
St Ives
December September
2005 2005
Gold produced - 000"ozs 125.9 119.8
Yield - Heap leach - g/t 0.5 0.5
Yield - Milling - g/t 3.2 3.1
Total cash costs - A$/oz 431 415
- US$/oz 322 316
Gold production for the quarter was 125,900 ounces, 5 per cent up from last
quarter"s 119,800 ounces. This increase was due to higher treatment volumes
through the Lefroy mill and higher grade ore from the open pit and underground
operations. The Lefroy mill produced 117,600 ounces for the quarter and the
heap leach plant 8,300 ounces, compared with 111,200 ounces and 8,600 ounces
respectively in the previous quarter.
Total tons processed during the quarter amounted to 1.71 million, an increase
of 4 per cent over the September quarter. The Lefroy plant processed 1.15
million tons, an increase of 3 per cent against the previous quarter as a
result of ongoing plant optimisation. Tonnage treated through the heap leach
plant increased from 522,000 tons to 562,700 tons as a result of improved plant
availability following purchase of the crushing plant from the contractor,
Henry Walker Eltin.
The combined head grade processed for both the Lefroy mill and the heap leach
pads at 2.6 grams per ton was up slightly against the September quarter"s 2.5
grams per ton. Improved performance of the underground mines led to an increase
in volume of high grade ore to the Lefroy mill and an increase in yield to 3.2
grams per ton from 3.1 grams per ton in the previous quarter.
Open pit mining operations produced 1.07 million tons of ore during the
quarter, down 11 per cent from 1.20 million tons the previous quarter. Open pit
ore grade increased to 1.75 grams per ton from 1.64 grams per ton the previous
quarter as higher grade ores were accessed in the Mars and Agamemnon open pits.
Waste movement increased as a result of the cutback on the Agamemnon pit to
access recently discovered extensions to the high grade ore zones.
During the quarter 1.74 million BCM"s mined of open pit ore and waste were
mined at an average strip ratio of 3.51, compared with 1.43 million BCM"s at an
average strip ratio of 2.64 in the September quarter.
Operating performance of the underground operations improved over the previous
quarter producing 441,500 tons of ore at 4.8 grams per ton compared with
427,600 tons of ore at 4.5 grams per ton in the September quarter. At the
Leviathan underground mine both volume and grade improved over the previous
quarter as stoping on the Conqueror deposit continued to ramp up. In addition,
the stability issues around the relatively higher grade East Repulse stopes
that impaired the previous quarter results were better managed in the December
quarter. Argo underground mine production was consistent quarter on quarter.
Operating costs increased from A$49 million (R244 million) to A$55 million
(R267 million) reflecting higher open pit mining waste volumes and higher ore
tons processed, as well as an additional A$0.8 million (R4 million) due to
unbudgeted maintenance and repair costs during the plant shutdown in December,
which was extended by 10 hours to complete these repairs. In addition, the
lower September quarter operating costs included an A$3 million (R15 million)
credit for power charges, reflecting settlement of a long running claim.
Royalties calculated at 10 per cent on the average quarterly gold price
above A$600 per ounce was payable during the quarter and amounted to
R3 million (A$0.6 million). Total cash costs increased from A$415 per
ounce (US$316 million per ounce) in the September quarter to A$431 per
ounce (US$322 million per ounce).
Operating profit at A$28 million (R137 million) was up on the A$19 million (R94
million) achieved in the September quarter. This was due to higher revenues
resulting from higher gold production and a higher gold price in Australian
dollar terms.
Capital expenditure for the December quarter amounted to A$18 million (R86
million) up slightly from A$16 million (R81 million) the previous quarter. The
increase in capital expenditure reflects an increase in waste stripping for
open pit mining plus additional exploration expenses. Capital expenditure will
increase slightly in the coming quarters in line with increased waste stripping
activity in the open pits.
Gold production and cash costs in the March quarter are expected to at least
match the December quarter.
Agnew
December September
2005 2005
Gold produced - 000"ozs 55.1 62.0
Yield - g/t 5.2 5.9
Total cash costs - A$/oz 351 303
- US$/oz 262 230
Gold production at Agnew decreased 11 per cent to 55,100 ounces in the December
quarter compared with 62,000 ounces in the September quarter. This was driven
by a 9 per cent reduction in ore grade from Kim lode at the Waroonga
underground mine. In addition, open pit head grade decreased to 1.96 grams from
2.50 grams per ton as a result of mining in lower grade zones.
Ore production from the Waroonga underground complex (Kim and Main Lodes)
decreased 9 per cent to 107,500 tons at a grade of 11.8 grams per ton from
117,300 tons at a grade of 12.9 grams per ton in the September quarter. This
resulted in gold production decreasing to 40,000 ounces from 45,000 ounces in
the September quarter. Productivity during the quarter was impacted by
increased support requirements as the deeper elevations of the mine are
developed. A mining method and support regime modification is planned at Kim
South for the March quarter and is expected to optimise productivity going
forward.
Volume moved at the Songvang open pit was down compared with the previous
quarter. Total BCM movement for the December quarter was 1,405,800, a reduction
of 9 per cent on the September quarter figure of 1,555,800 BCM.
This was driven by reduced waste movement reflected by the strip ratio dropping
to 14.8 from 16.1. Ore mined from the pit totalled 250,500 tons at a head grade
of 2.0 grams per ton compared with the September quarter"s 248,900 tons at a
head grade of 2.5 grams per ton.
Operating costs decreased slightly from A$20 million (R99 million) in the
September quarter to A$19.8 million (R97 million) in the December quarter
reflecting the lower production but offset somewhat by increased unit mining
costs at the Songvang open pit due to increased ore hardness and mining depth.
Total cash costs increased from A$303 per ounce (US$230 per ounce) in the
September quarter to A$351 per ounce (US$262 per ounce) in the December
quarter. The increase was as a result of the decrease in gold production
coupled with an increase in processing costs and unit mining costs at Songvang
as the pit deepens and harder ores are encountered.
Agnew"s operating profit decreased from A$17 million (R83 million) in the
September quarter to A$16 million (R79 million) in the December quarter,
reflecting the decrease in production.
Capital expenditure increased from A$6 million (R30 million) to A$7 million
(R33 million) in the December quarter due to an increase in the development
costs at the Waroonga underground mine.
Gold production is expected to decrease slightly and cash costs increase in the
March quarter as the high grade ore body at Kim is supplemented with lower
grade Main Lode ore.
Quarter ended 31 December 2005 compared with quarter ended 31 December 2004
restated
Attributable gold production in the December 2005 quarter was similar at
1,040,000 ounces when compared with 1,048,000 ounces in the December 2004
quarter. Production at the South African decreased from 725,000 ounces to
698,000 ounces produced mainly at Kloof due to lower underground grades and
volumes. At the international operations, gold production increased from
322,000 ounces to 342,000 ounces, the majority of this increase is due to
the commissioning of the new Lefroy mill at St Ives late December 2004 when
comparing the two quarters.
Revenue increased 18 per cent in rand terms (increased 11 per cent in US dollar
terms) from R2,945 million (US$480 million) to R3,479 million (US$534 million).
This increase in revenue was due to the increase in the average gold price
which increased 19 per cent from R84,872 per kilogram (US$431 per ounce) in the
December 2004 quarter to R101,184 per kilogram (US$482 per ounce) in the
December 2005 quarter.
Group operating costs in rand terms increased 9 per cent to R2,542 million
(US$390 million). At the South African operations operating costs increased 3
per cent from R1,687 million (US$275 million) to R1,732 million (US$266
million) with cost reduction initiatives partially offsetting the
6.5 per cent wage increase during the year. The increase in operating costs at
the international operations amounted to 7 per cent, to R786 million
(US$121 million). The main reason for this increase was the increased
production at St Ives due to the commissioning of the new mill, significant
increases in diesel, steel and reagents over the past year and increased
cost of maintaining the owner mining fleet at Tarkwa, as well as normal
inflationary pressures.
Operating profit at R958 million (US$147 million) for the December 2005 quarter
compares with R637 million (US$103 million) for the December 2004 quarter.
Profit before tax amounted to R500 million (US$77 million) compared with R239
million (US$39 million) in the December 2004 quarter. This increase was mainly
due to the increase in operating profit.
Earnings increased from R67 million (US$11 million) in the December 2004
quarter to R262 million (US$40 million) in the December 2005 quarter. Earnings
excluding gains on financial instruments, foreign debt and exceptional items
increased from R87 million (US$14 million) in the December 2004 quarter to R275
million (US$42 million) this quarter.
Capital and development projects
Bolivar
On 12 January 2006, both the shareholders and warrant/option holders of
Bolivar Gold Corp. voted overwhelmingly in favour of the plan of arrangement
through which Gold Fields proposes to acquire Bolivar.
76.7 per cent of shares and 82.1 per cent of warrants/options represented and
voting at the meeting were voted in favour of the transaction, with the
only significant dissenting shareholder being Scion Capital LLC, which
owns approximately 19.9 per cent of the shares of Bolivar. 96.1 per cent
of all outstanding shares and 81.0 per cent of all outstanding warrants
were represented at the meeting.
The next step in the plan of arrangement process is for the Supreme Court of
the Yukon Territory of Canada to consider the fairness of the transaction,
which initial hearing was scheduled for 19 January 2006. However, due to the
fact that Scion has filed an oppression claim against Bolivar, its senior
officers and non-independent directors, as well as Gold Fields, the court
stated that the fairness hearing and oppression claim should be heard together,
such hearing to be heard from February 7 to 10 February 2006, If court approval
is obtained, the transaction is expected to close shortly thereafter. In
addition, Scion has filed an application with the Ontario Superior Court of
Justice alleging that Gold Fields has contravened certain provisions of the
Ontario Securities Act. Gold Fields will vigorously defend such application,
which is due to be heard on 2 February 2006.
Cerro Corona
During December 2005 the Environmental Impact Assessment for the Cerro Corona
Project was approved by the Peruvian Government. Pursuant to this approval, the
acquisition was completed in the middle of January 2006.
Completion of this acquisition means that Gold Fields now owns 92 per cent of
the voting interest (80.72 per cent of the economic interest) for a
consideration of US$40.36 million in Sociedad Minera La Cima, which owns the
Cerro Corona Project and other mineral properties in the Cajamarca district.
The Project involves the development of a 91 million tons gold / copper
porphyry deposit at a capital cost of US$277 million. The project is expected
to produce approximately 2.3 million ounces of gold and 412,000 tons of copper
