Gold Fields maintains gold reserves

[] — RISING working costs and the impact of stricter safety considerations have hit Gold Fields’ mineral resources position although the group’s mineral reserves remained healthy as of end-December.

The group maintained its total attributable mineral reserves at 76.7 million ounces (m oz) of gold at the end of December compared with 78m oz at end-June.

Gold Fields CEO Nick Holland told a presentation to financial media and analysts held in Johannesburg on Thursday that, “this is a great achievement in the face of some of the cost increases that we have had to deal with but it is not going to be easy going forward.’

Attributable reserves represent the amount of gold contained in reef that a mine has ready to be mined profitably which, in turn, determines the remaining economic life of the mine.

These reserves are constantly being depleted by the actual mining operations but can be replenished provided the mine carries out the development work required to convert some of its remaining mineral resource into mineral reserve.

Gold Fields’ mineral reserve was boosted by an 18% increase at the developing South Deep mine to 34.5m oz ( June 2010 – 29.3m oz) which helped offset the impact of a 24% drop in reserves to 20.2m oz (26.7m oz) at the group’s flagship KDC mine.

KDC (the Kloof Driefontein Complex) comprises Gold Fields’ two major deep-level mines near Carletonville where reserves were hit by a change in mining plan implemented to save on capital expenditure.

Gold Fields management has decided to go for a decline shaft system to access deeper ore at KDC instead of the previously proposed 9 shaft deepening project which called for a sub-vertical shaft system.

The decline shaft will be cheaper to develop and will provide faster access to the new gold bearing reefs but will open up a lesser amount of those reefs than the previously proposed sub-vertical shaft.

Mineral resources at KDC plunged 45% to 71.9m oz (129.9m oz) because of the negative impact of rising costs on the economic viability of mining them and decisions taken not to mine various areas because of a stricter approach to safety requirements.

According to Gold Fields it may be possible to restore these gold volumes to the resource calculation in future depending on changes to the gold price and advances in mining technology which could improve underground safety.

The latest numbers also reported a 16% rise in the uranium mineral resource owned by Gold Fields to 90.1 million pounds (mlbs) from 77.9mlbs but Holland said this would make no difference to management’s decision to hold off on the proposed uranium treatment plant.

He commented, “the situation facing us now is very different from the one three years ago when we looked at the uranium project.

“We now have five new gold projects which is a lot on our plate and we need to prioritise. When we started the uranium project the need to prioritise was far less than it is now.

“I think the uranium project will have a role in the future but we will not press that button this year or next. “

The writer owns shares in Gold Fields.