Ian Cockerill, CEO, Anglo Coal
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» Sexwale to leave Gold Fields' board
» Gold Fields' offshore plans hit snag
» Gold Fields sells a second international asset
» Gold Fields sells Essakane project for $200m
» Gold Fields envisions no more empowerment deals
» Gold Fields to sell uranium assets

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A vigorous asset spring clean at Gold Fields
David McKay
Posted: Tue, 23 Oct 2007

[miningmx.com] -- GOLD FIELDS CEO Ian Cockerill recently described all gold industry managers as "eternal optimists". Is that perhaps why he bet Paul Walker, CEO of British metals research house GFMS, that the price of gold would reach four digits - probably US$1 200/oz - within a couple of years?

Walker's potential debt is to shave his hair, currently worn long in homage, perhaps, to a raffish past. Cockerill says he doesn't have much hair to risk and may sport even less in two years' time.

But if Cockerill really feels that way about the price of gold, then he should surely be keeping a watchful eye on the resources Wits Gold (Witwatersrand Consolidated Gold Resources) has under its well-marketed hood.
get that wrong you screw up the mine
It has literally millions and millions of ounces of gold resources, the kind Gold Fields spent billions of rand on when it successfully bid US$2,5bn for South Deep last year.

However, the question is at what gold price would ounces such as Wits Gold owns come into economic play?

It's no exaggeration to say that Cockerill's success as a gold company manager now rests squarely on turning South Deep into the star it's long promised to be.

"It's a 50-year orebody - but there's only one chance to get the design right," says Cockerill of South Deep. "If you get that wrong you screw up the mine for the rest of its life."

Gold Fields is completing an optimisation study of the mine, as well as finding ways of incorporating a second phase expansion by using infrastructure of the neighbouring Kloof mine, which Gold Fields owns.

By 2008, Gold Fields hopes to submit a full pre-feasibility explaining its preferred options.

Meanwhile, Cockerill has been spring-cleaning Gold Fields, dispensing of its Essakane project in Burkina Faso and selling its shares in Choco 10, a mine in Venezuela. The company grossed $732m on both divestments and earned a 25% return on Choco 10 alone, while retaining a 38% stake in the asset's buyer, a Russian firm called Rusoro Mining.

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Cockerill says the group's obligations at South Deep have little to do with the sale of Essakane and Choco 10, as South Deep is managed by an entirely different group of people within Gold Fields. But both deals certainly helped fix executives' attention on its South African assets.

Cockerill also stands by Gold Fields' international strategy. "This strategy is not off the drawing board. It's not in retreat," he says. "We'll actually use funds to accelerate Cerro Corona (a mine in Peru) and we have an interesting exploration pipeline."

However, there are no plans, as yet, to bid for a stake in Harmony Gold's Papua New Guinea mine Golpu/Wafi, although Cockerill says the firm would kick the tyres if given the chance.

But realistically, analysts believe Cockerill and his management team would get caned for considering any other large transactions, even though the gold industry is back on the M&A trail following Barrick Gold's all-cash $1,5bn bid for Miramar, another North American firm.

"We welcome the deal," says Muneer Ismail, a Deutsche Bank gold analyst, of Gold Fields' recent divestments in a note dated 12 October. "The slimmed down project and operational portfolio should help refocus management's attention on its production function, which has waned recently in our view."

The inflow of funds from both the sale of Essakane and Choco 10 should help shore up Gold Fields' balance sheet and reduce capital budgeting risk, particularly at South Deep, Ismail says.