Holland shakes up Gold Fields with ambitious plans

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Nick Holland, CEO, Gold Fields

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� Cerro Corona key to Gold Fields' S.American plans
� Gold Fields sees improved gold output
� Gold Fields ups Sino stake for R637m
� Gold Fields reviews 20% of SA production
� Nine killed in cage plunge at Gold Fields
� Cockerill joins Anglo Coal as CEO
� John Munro stakes his future on uranium

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Holland shakes up Gold Fields with ambitious plans
Allan Seccombe
Posted: Wed, 30 Jul 2008

[miningmx.com] -- NICK Holland is making sweeping changes in his new role as CEO at Gold Fields, including diluting control at head office in South Africa by creating four regional bases, targeting aggressive growth of a million ounces and adding base metals, and possibly uranium, to its production profile.

Holland, the former chief financial officer at Gold Fields who worked with Brian Gilbertson in setting the company up, took over as CEO after the resignation of Ian Cockerill at the end of April this year. He brings with him 20 years of mining industry experience in gold, platinum and coal.

In his first 90 days in office, Holland is shaking up the company, suggesting that in three or four years a decision will be made whether the head office will be moved closer to the main investor market and also give more focused attention to its assets. Eighty percent of its shareholders are outside South Africa.

In 3 to 4 years we�ll be at 5 million oz

Holland has set a production target of four million ounces by the end of this year or early next year, bringing the company back to where it was in the past.

In the first nine months of this year, gold output was 2.773 million oz. Based on company expectations of a 6.5% increase in South African production in the fourth quarter; Gold Fields will produce around 3.6 million oz of gold for the year to end-June 2008.

Safety, the key change that Holland is bringing to Gold Fields� operations, will subdue production for at least another quarter or two, as it delays some mining operations to make shafts and tunnels safer.

These include the shutting of 10 shaft at Driefontein, where only sweeping is now done, work on the main shaft at Kloof has been deferred and 3 and 8 shaft at Kloof are at 50% production.

�We need to scale back operations until we�ve addressed safety. We are taking short-term pain,� Holland told Miningmx. Gold Fields brings out its June quarter results on Friday, limiting the amount of detail Holland could give.

�I�m not prepared to carry on with the fatalities we had in this company,� he said on the eve of the resignation of chief operations officer Terence Goodlace for personal reasons.

�I�m going be in peoples� faces about safety.�

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The cutbacks in production in South Africa to address safety will be offset by new projects coming on stream, including the Cerro Corona copper/gold mine in Peru, the expansion of Tarkwa and improvements at St Ives in Australia, which will jack production up by 15% from 100,000 oz/quarter.

Holland said the drive to push Gold Fields back to four million ounce annual production was his second priority after making the company�s operations safer.

THE FOCUS IS ON REAL RETURNS Since taking over as CEO, Holland says, he�s spoken to funds around the world, establishing that the size of reserves, the size of production and what position a company holds in the league of gold miners are not important.

�They focus on real returns,� he said, pounding home the message that Gold Fields now looks at notional cash expenditure per ounce, which is the operational cost and all capital expenditure per ounce of gold.

Gold Fields estimates it will produce gold at $725 to $750/oz against an industry cost curve of $750 to $850/oz.

Assuming the four million ounce production and a gold price of $925, that translates into $800m/year in cash flow before tax and exploration expenditure. �That�s our short-term objective, we�ll be there in six months,� Holland said.

At five million oz on the same gold price assumption, this means $1bn a year on the same basis.

Growing ounces is a key plank in Holland�s strategy. He wants to shift the perception of Gold Fields being a South Africa-centric company with a few international assets tagged on.

The plan is to create four principle empowered regions for the company, with the size and importance of the head office in South Africa shrinking to become a brains trust and a strategy and monitoring centre.

�The executives in those regions will be truly empowered. In the past these guys have only run the mines. Now they will be responsible for growth,� Holland said.

Not only that, but the company will shift offices. �There�s been a change in management. There�ll be a change in address. We need to get out of this building where we�ve been for 10 years.�

The size of the head office has already been halved to 75 people, by shifting South African-asset focused staff closer to the mines west of Johannesburg. The remaining staff will be moved to smaller offices elsewhere in Johannesburg.

�We are satisfied that for now South Africa is the right place for us. In the next two or three years, who knows. We�ve got to keep our options on where we should be to best manage our portfolio and shareholders,� he said.

Holland also said he was �not afraid� of restructuring Gold Fields� portfolio if an asset does not make money.

Holland shed more light on the strategy of growing production at each of the three regions outside South Africa to a million ounces each, ditching the plan formulated under Ian Cockerill to grow international production by 1.5 million oz over five years.

�In the past four or five years, Gold Fields has not made as much progress as people would have liked. Maybe the targets we set for ourselves were too tough,� he said, adding Gold Fields was now looking for smaller deposits of around two million oz, down from the five-million oz level before.

�In three to four years we�ll be in production at that five million oz level. It�s probably a bit ambitious but we are very focussed on delivery,� he said. The extra ounces will come from internal assets and/or acquisitions.

�If a chief executive does not set targets for himself and the company that are ambitious then they�ll never get anywhere.�

In South America, production at the 370,000 oz/year Cerro Corona copper/gold mine could be doubled and there is exploration potential in Peru near the mine, in Chile and as far north as the Dominican Republic. �In the first quarter of 2009 we will formulate a strategy for growth there.�

In Australasia, there are two mines in Australia at 640,000 oz/year. Gold Fields has 19.9% stake in Sino Gold, which is exploring China, and Conquest, which has a large land package in Australia. There is also near-mine exploration Gold Fields will pursue more vigorously towards meeting its million ounce target.

In Ghana, with the expansions underway, production will reach 675,000 oz/year. �It will not need a lot to get us to one million ounces.�

South Africa, the fourth region, will be a 2 to 2.3 million oz producer.

�Then we will be a truly diversified, global mining company,� Holland said.

A decision will be made in the next six month on what to do with some 80 million pounds of uranium in 300 million tonnes of tailings dumps in South Africa. �This could be our next mine,� he said.

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