Ian Cockerill, CEO, Gold Fields
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Gold Fields not returning to marginal oz
Allan Seccombe
Posted: Wed, 17 May 2006

[miningmx.com] -- GOLD Fields is increasing the rate of development on its South African mines to give it flexibility to take advantage of higher gold prices, but it is not returning to a strategy of high volumes of low-grade ore, said Brendan Walker, the head of Gold Fields local operations.

Company comments made at a presentation about a 22% increase in development and ore reserve generation at the company’s three South African operations attracted immediate criticism from analysts.

They asked whether this was an attempt to move back into low-grade mining, a policy that burnt the company’s fingers a couple of years ago, and if it was a sensible plan given the enormous volatility in the gold price.

“The currency and commodity markets can move just so much faster than your underground plans can,” said one analyst, who asked if the company was planning to repeat the strategy.

However, Walker said Gold Fields was not going back to a strategy abandoned in mid-2004 of mining large volumes of low-grade ore.

We’re not looking at mining more marginal tonnage
“Our strategy is to maintain the margin at the current gold price, but to reinvest in the ore body to create more flexibility which will assist us in managing our grades. We’re not looking at mining more marginal tonnage at this stage,” Walker said. Gold Fields wants to retain a 20% margin.

The company’s latest reserves and resources statement is more or less unchanged from the previous one as the rand and Australian dollar eased any upside in the dollar gold price that would have fed into the data.

Gold Fields total reserves for the six months to end-December 2005 were up just one percent at 65.3 million ounces and resources, inclusive of reserves, were three percent higher at 179.3 million ounces.

The calculation used a three-year trailing average gold price up to August last year, not in any way reflecting the massive run up in bullion since the start of the year. This is because of strict rules governing the calculation of these data.

If a gold price of R130,000/kg was used, the reserves at the South African operations would be 9.5 million oz higher, CEO Ian Cockerill said. South African reserves were 45.1 million oz.

“You can see the impact of the strength of the Australian dollar and the South African rand. There’s been no real change in the base prices we’ve used to calculate the reserves,” he said.
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Gold Fields used a price of R105,000, A$650 and $475 to calculate its resources and R92,000, A$560 and $400 for its reserves.

The gold price is now at R143,839/kg or $712/oz and A$920/oz.

Gold Fields, which has gained about 30% in its shareprice so far this year, is using an operational price of R100, 000, A$660 and $500.

Gold Fields has changed the cycle of its reserves and resources statement to December from June.