[miningmx.com] – GOLD Fields CEO, Nick Holland, has strongly defended the use of gold prices markedly higher than current spot levels in determining the group’s mineral resources and mineral reserves position at end-December.
Gold Fields has calculated its mineral resources using a price of $1,500 per ounce, while a price of $1,300/oz was used to calculate the group’s mineral reserves. The gold price has sat consistently below $1,300/oz since last August bar a brief spike in mid-January this year.
Overall, Gold Fields reported healthy reserves and resources with group managed gold reserves sitting at 52.1 million oz at end-December compared with 52.6 million oz at the end of 2013 while managed resources had dropped to 128.2 million oz from 136.7 million oz over the same period.
The main factors in the drop in resources were the disposal of the Chucapaca and Yanfolila projects – which removed 7.6 million oz from the total – partly offset by the inclusion of 3.1 million oz from the Salares Norte project in Chile.
Gold Fields’ group competent person Tim Rowland described Gold Fields’ resources and reserves numbers as being “very solidly and robustly aligned’ to SAMREC (South African Code for Reporting of Exploration Results, Mineral Resources and Mineral Reserves) as well as JSE listing requirements and SEC listing requirements.
According to Holland, the critical issue is that Gold Fields has calculated that its group life-of-mine (LOM) plan will deliver a 15% consolidated free cash flow (FCF) margin based on reserves calculated at a price of $1,300.
“There’s been a lot of debate over what price you should use to determine your reserves and resources,” said Holland.
“The important point is that these reserves make 15% over their life so what is critically important for us is that we do not just talk to a one year operational plan.
“We are actually talking about making sure the LOM planning has this factored into it so that, if we are wrong and the gold price is lower than $1,300, it means we have a margin of safety between the $1,300 we have factored in and the prevailing price.
“That means we do not have to do emergency rescheduling of our operations. We have comfort they will withstand the vagaries of the commodity markets.
“I think you will find – if you talk to the other companies in the gold sector – that probably we are the only ones who are giving you that kind of resolution.”
Asked how long the gold price would have to remain at levels below $1,300 before Gold Fields would have to modify its planning Holland replied: “We are probably okay to $1,100. If gold went to $1,100 – or below – and stayed there for a year or so then we would have to rethink.”
Asked whether using a lower gold price at end-December to calculate the group’s mineral reserves would have resulted in lower total reserves, Holland said: “I don’t think so because of the robustness in the margins which gives you the cushion to absorb lower prices.
“There would not be a material change in our reserves if they were restated at $1,200/oz,” he said.
