Ian Cockerill, CEO, Gold Fields
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Gold Fields targets one million oz growth
Allan Seccombe
Posted: Wed, 01 Aug 2007

[miningmx.com] -- THE Gold Fields board has approved R2.995bn towards a R4.3bn project to raise output at its recently acquired South Deep gold mine to 800,000 oz/year, a central plank in its strategy to add a million new ounces of production.

During the June quarter, the board approved the R3bn in a R4.3bn project pipeline at South Deep to develop and equip an area below 95 level, deepen the ventilation shaft, install a refrigeration plant on 94 level and conduct a 40 month surface exploration drilling at the mine it's owned for eight months, said CEO Ian Cockerill.

Gold Fields is a four million ounce producer.

The original cost estimate of the expansion project by the previous owners was R3.5bn, but this has now risen to R4.3bn as Gold Fields reviewed the figures and made scoping changes and included inflation. The last remaining big-ticket item is a tailings dump along with a number of smaller subsidiary projects.
we can fund this capex internally
All the cash generated at Gold Fields' mines during the course of the 2008 financial year will be poured into a group-wide $1bn or R7.1bn capex programme for that year, said chief financial officer Nick Holland. In 2007, capex was $850m, more than double the previous period.

"We are confident we can fund this capex internally, but we have debt facilities if we need them," he said.

Gold Fields is planning to issue a domestic bond during the course of this year, which it will mainly use towards paying down $718m within a $750m revolving credit facility, which will free up some fire power if the company decides on further corporate activity, Holland said.

Harmony Gold last month postponed issuing an offshore bond because it found unfavourable terms for its paper in light of the subprime fallout in the United States spread to other debt markets.

Gold Fields, however, was certain of placing its bonds with a seven to 12 year life span in the domestic market after conducting a due diligence into the matter, Holland said, adding the issue could be completed in stages. The amount it plans to raise has not yet been decided.

Gold Fields will grow its gold output by a million ounces over the next five years, said John Munro, head of corporate development. The first kick up in the company's gold output will come from its Cerro Corona copper porphyry project in Peru, which will begin shipping concentrate from the March quarter 2008. At full production, output will be 400,000 equivalent gold ounces.

Gold Fields is keen to grow its exposure to Peru, having found a favourable mining environment there, Munro said. Cockerill said copper porphyry deposits were a growth area Gold Fields was targeting.

The third most likely project to come on stream will be Essakane in Burkina Faso, which has an estimated three million ounces of gold. Production could start from an opencast mine in 2009.

Gold Fields bought South Deep for R20bn in cash and shares. South Deep's resources are one of the largest gold deposits remaining in South Africa. Gold Fields this month agreed to buy an estimated 16 million ounces contained in neighbouring ground from the suspended mining investment company JCI for R400m.

South Deep produced on average 122,000 tonnes/month in the June quarter at 5.7 grams/tonne. The mine produced 69,500 oz of gold in the period compared to 66,700 in the previous quarter. South Deep is also treating surface material.

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Gold Fields’ attributable gold output increased three percent in the June quarter to 1.015 million oz, with total cash costs remaining flat at R92,273/kg.

Its production for the 2007 financial year was 4.02 million oz, down slightly from 4.07 million ounces in the year before. Total cash costs rocketed 28% to R87,070/kg over the year.

Reasons for the cost escalation included above-inflation wage increases, more expensive inputs like steel and cyanide, increased power-generating costs in Ghana as well as the acquisition of South Deep and Choco 10 in Venezuela. The latter two added nearly R950m in costs for the year.

Annual operating profit jumped to R7.75bn from R5.14bn the previous year as a result of the higher gold price. Net earnings were R2.36bn from R1.54bn before.