Gold Fields Limited - Results for the Quarter Ended 30 September 2003
Gold Fields Limited
Incorporated in the Republic of South Africa
Registration number 1968/004880/06
Share code: GFI
Issuer code: GOGOF
ISIN: ZAE000018123
NEWS RELEASE Q1 F2004 RESULTS
Quarter Ended 30 September 2003
-Unaudited-
STOCK DATA
Number of shares in issue
- at 30 September 2003 473,650,481
- average for the quarter 472,885,574
Free Float 100%
ADR Ratio 1:1
Bloomberg / Reuters GFISJ / GFLJ.J
JSE SECURITIES EXCHANGE SOUTH AFRICA (GFI)
Range - Quarter ZAR82.10 - ZAR110.40
Average Volume - Quarter 1,418,814 shares / day
NYSE (GFI)
Range Quarter US$10.52 US$15.28
Average Volume - Quarter 1,493,513 shares / day
INVESTOR RELATIONS
Europe & South Africa
Willie Jacobsz Nerina Bodasing
Tel : +27 11 644-2460 Tel : +27 11 644-2630
Fax: +27 11 484-0639 Fax : +27 11 484-0639
E-mail: investors@goldfields.co.za
North America
Cheryl A. Martin
Tel: +1 303 796-8683
Fax: +1 303 796-8293
E-mail: camartin@gfexpl.com
www.goldfields.co.za www.gold-fields.com
First Quarter Net Earnings of R421 million (89 cents per share)
or US$57 million (US$0.12 per share)
JOHANNESBURG. 30 October 2003 Gold Fields Limited (NYSE & JSE: GFI) today
announced September 2003 quarter net earnings of R421 million (89 cents per
share) compared to net earnings of R789 million (167 cents per share) in the
June 2003 quarter and R542 million (115 cents per share) for the corresponding
quarter in 2002. In US dollar terms first quarter net earnings were $57 million
(US$0.12 per share) compared with $98 million (US$0.21 per share) in the June
2003 quarter and $52 million (US$0.11 per share) for the corresponding period
in 2002.
First quarter highlights included:
* Attributable gold production of 1.038 million ounces, similar to the
previous quarter.
* Total cash costs up 6.6 per cent in rand terms to R67,566 per kilogram and
up 10.6 per cent in dollar terms to US$282 per ounce.
* Operating profit of R570 million (US$77 million), 21 per cent down from the
previous quarter as a result of wage increases and the strong rand.
* Earnings enhanced by R240 million (US$32 million) from the sale of mineral
rights and associated assets at Driefontein.
* Mineral resources increased by 9.3 million ounces to 195.3 million ounces
and mineral reserves by 3.0 million ounces to 81.5 million ounces.
* 12 million ounce Arctic Platinum Project now 100 per cent owned by Gold
Fields after the purchase of 49 per cent from Outokumpu for US$31 million.
Ian Cockerill, Chief Executive Officer of Gold Fields said:
"Results for the first quarter were negatively impacted by above inflation
annual wage increases, lower underground yields at Beatrix, other normal
inflationary increases and a marginally lower rand gold price received,
associated with a stronger rand. Operating margins and earnings were
consequently lower than the previous quarter."
"To address these pressures, the company has initiated various changes
including a reduction in marginal tonnage which was deliberately increased in
times of higher prices. Capital expenditure at the South African operations has
already been reduced and is subject to ongoing scrutiny. In addition, paylimits
are in the process of being reviewed since it is likely that the rand will
remain at current levels or stronger for longer than originally anticipated.
It will take some time for the benefits of these changes to be realised."
Salient features
SA Rand
Quarter
September June September
2002 2003 2003
Gold produced* 35,163 32,380 32,299 kg
Total cash costs 61,222 63,369 67,566 R/kg
Tons milled 10,831 10,925 11,497 000
Revenue 104,542 86,751 86,184 R/kg
Operating costs 222 204 204 R/ton
Operating profit 1,578 717 570 Rm
Net earnings 542 789 421 Rm
115 167 89 SA c.p.s
Headline earnings 542 494 164 Rm
115 104 35 SA c.p.s
Net earnings excluding gains
and losses on financial 735 226 136 Rm
instruments and foreign debt
net of cash and exceptional items 156 48 29 SA c.p.s.
US Dollars
Quarter
September June September
2003 2003 2002
Gold produced* oz (000) 1,038 1,041 1,130
Total cash costs $/oz 282 255 183
Tons milled 000 11,497 10,925 10,831
Revenue $/oz 360 349 313
Operating costs $/ton 27 26 21
Operating profit $m 77 100 152
Net earnings $m 57 98 52
US c.p.s. 12 21 11
Headline earnings $m 22 64 52
US c.p.s. 5 14 11
Net earnings excluding gains and
losses on financial instruments
and foreign debt $m 18 34 71
net of cash and exceptional itemsUS c.p.s. 4 8 15
*Attributable All companies wholly owned except for Ghana (71.1%).
Overview
As indicated last quarter, earnings at R421 million (US$57 million) are
significantly lower this quarter as a result of above inflation local wage
increases, the stronger rand and a reduction in gains on financial instruments
and foreign debt and profits earned on the sale of investments. This is despite
the inclusion this quarter of a profit on the sale of certain mineral rights
and associated assets to AngloGold. The pre-tax profit on this sale amounted to
R187 million and after accounting for the deferred tax release, the total
impact on earnings was R240 million (US$32 million).
The Group"s attributable gold production for the September quarter at 1.038
million ounces is in line with the June quarter.
Total cash costs in the September quarter increased 6.6 per cent from R63,369
per kilogram to R67,566 per kilogram and in US dollar terms increased 10.6 per
cent from US$255 per ounce to US$282 per ounce due to the rand strengthening 4
per cent from R7.74 to R7.44 to the US dollar.
Health and safety
During the quarter the safety performance at the South African operations
slipped back slightly from the five-year record high standards achieved during
the 2003 financial year. The lost day injury frequency rate regressed from 13.9
to 15.9, the serious injury frequency rate from 6.6 to 7.2 and the fatal injury
frequency rate from 0.23 to 0.31. During the quarter the Full Compliance Safety
Campaign was relaunched at all operations to consolidate the gains made in
safety over the past five years. Indications are that the campaign is meeting
the objective of re-energising safety vigilance at all levels in the
organisation.
Financial Review
Quarter ended 30 September 2003
compared to quarter ended
30 June 2003
REVENUE
Revenue is marginally lower than the previous quarter due to a lower rand gold
price as a consequence of a 4 per cent strengthening of the average rand/US
dollar exchange rate from 7.74 in the June 2003 quarter to 7.44 this quarter.
This was partly offset by a higher US dollar gold price of US$360 per ounce,
compared to US$349 per ounce in the June quarter. The resultant rand gold price
of R86,184 per kilogram is thus 1 per cent lower than the R86,751 per kilogram
achieved last quarter. The lower gold price was partly offset by the higher
gold sales at 34,257 kilograms (1,101,400 ounces) as compared to 34,244
kilograms (1,101,000 ounces) last quarter, which resulted in revenue of R2,952
million (US$397 million) compared to R2,971 million (US$383 million) last
quarter.
OPERATING COSTS
Operating costs at R2,342 million (US$315 million) for the quarter were 5 per
cent higher than the previous quarter"s costs of R2,224 million (US$281
million). At the South African operations costs increased 7 per cent compared
to the previous quarter. This was mainly due to the wage increases effective
from 1 July and the full expensing of all operating costs at Kloof 4 shaft, as
this is now regarded as a fully operating shaft. The latter item increased
working costs by R24 million. The wage agreement at the South African
operations increased costs at these operations by approximately 4 per cent. At
the international operations costs were flat in rand terms at R656 million
(US$88 million) for the quarter. On a Group basis, total cash costs increased
from R63,369 per kilogram in the June quarter to R67,566 per kilogram this
quarter.
The net effect of the marginally lower revenue and higher costs, together with
a gold in process charge resulting from a net release of inventory at the
international operations, was a decrease in operating profit from R717 million
(US$100 million) in the June quarter to R570 million (US$77 million) this
quarter.
OPERATING MARGIN
The operating margin for the Group declined from 24 per cent to 19 per cent in
the current quarter. This is due to a decline in margins at the South African
operations quarter to 11 per cent in the current quarter. The decline at the
local operations resulted from slightly lower production, the wage increases
and the lower rand gold price. This situation is clearly unsustainable since
insufficient funds are being generated to fund capital expenditure and to set
aside funds for dividends, as well as meeting the Mining Charter obligations.
Accordingly, paylimits are being reviewed and urgent efforts are being expended
on investigating ways in which to increase gold production in the short term
and productivity in the medium to longer term.
AMORTISATION
Amortisation was slightly below the previous quarter at R299 million
(US$40 million).
FINANCIAL INSTRUMENTS AND DEBT
The Australian dollar once again strengthened against the US dollar, from 66.22
US cents at the end of the June quarter to 68.14 US cents at the end of the
current quarter. The stronger Australian dollar resulted in a gain on foreign
debt net of cash of R1 million (US$0.2 million) as compared to a gain of R66
million (US$7 million) achieved in the June 2003 quarter. Outstanding debt at
the Australian operations reduced from US$29 million at the end of the June
quarter to US$19 million by the end of September.
As previously reported, the Australian operations established currency
financial instruments to protect the cash flows against a possible
strengthening of the Australian dollar against the United States dollar. At the
quarter end, US$300 million was outstanding under these instruments. Gains on
these financial instruments amounted to R68 million (US$9 million) in the
current quarter compared to R320 million (US$36 million) in the previous
quarter.
At the end of the September quarter, the marked to market value of
these US dollar/Australian dollar financial instruments was a
positive R576 million (US$80 million).
The gain on the above financial instruments was partially offset by an
unrealised loss of R32 million (US$4 million) on the SA rand/US dollar forward
cover of US$40 million. During the quarter US$4 million was purchased in
addition to the US$36 million purchased in the June quarter. In the June
quarter the unrealised loss amounted to R9 million (US$1 million). These
forward purchases are to hedge the Group"s commitment in respect of the Tarkwa
mill and owner mining projects approved at US$159 million, to the extent that
these projects are funded from South African sources. The weighted average
forward rate in respect of the forward cover is R8.68 to the US dollar and
maturity is on 3 June 2004. The marked to market value of this forward
purchase at the end of the quarter was a negative R41 million (US$6 million
negative).
Details of the financial instruments are provided on page 11 of this report.
EXPLORATION AND OTHER
Exploration decreased, from R100 million (US$12 million) in the June quarter to
R55 million (US$7 million) in the September quarter. The June quarter included
a write-off of R43 million (US$5 million) incurred on exploration "farm-in"
projects in which an ownership interest had not vested.
EXCEPTIONAL ITEMS
Profit before taxation and exceptional items was R287 million (US$39 million)
compared to R697 million (US$93 million) posted in the June 2003 quarter.
Exceptional items include the sale of certain Driefontein mineral rights and
associated assets to AngloGold for a profit of R187 million, the sale of
567,200 shares in Chesapeake Gold Corporation (61 per cent of our holding), the
remaining 88,128 shares in Glamis Gold Limited and 313,500 (13 per cent of our
holding) held in Orezone Resources Inc. These investment sales generated
profits of R16 million (US$2 million). This, together with sundry asset sales,
resulted in an exceptional gain of R205 million (US$28 million) compared to
R272 million (US$31 million) in the June quarter. The exceptional gain in the
June quarter related mainly to the sale of investments.
The sale of the Beta Hunt mineral rights in Australia, sold at cost, boosted
cash flows by R56 million and will reduce life of mine amortisation charges at
St. Ives by some A$13 million.
TAXATION
Taxation at R37 million (US$5 million) is 75 per cent below the previous
quarter as a result of reduced operating profit. A deferred tax credit of R11
million arose due to a R53 million (US$7 million) deferred tax release
resulting from the sale of certain Driefontein mineral rights and associated
assets to AngloGold.
EARNINGS
Net earnings, after accounting for minority interests, were thus R421 million
(US$57 million) or 89 cents per share (US$0.12 per share), compared to
R789 million (US$98 million) or 167 cents per share (US$0.21 per share) in the
previous quarter.
Headline earnings i.e. net earnings less the net after tax effect of asset
sales, amounted to R164 million (US$22 million) compared to R494 million (US$64
million) last quarter. The main reason for this decrease was the lower gains on
financial instruments and foreign debt, which decreased some R340 million
(US$37 million) quarter on quarter. Headline earnings per share decreased from
104 cents (US$0.14) to 35 cents (US$0.05) over the same period.
Earnings, excluding exceptional items as well as the net gains on financial
instruments and foreign debt after taxation, amounted to R136 million (US$18
million) or 29 cents per share (US$0.04 per share) as compared to R226 million
(US$34 million) or 48 cents per share (US$0.08 per share) achieved last
quarter.
CASH FLOW
Operating cash flow for the quarter was R32 million (US$4 million), compared to
operating cash flow in the June quarter of R577 million (US$95 million). The
decrease is mainly due to the lower operating profit as well as taxation
payments of R303 million (US$41 million) relating to prior periods.
During the quarter the final dividend of 100 S.A. cents per share for fiscal
2003 was paid amounting to R472 million (US$63 million).
Capital expenditure was R553 million (US$74 million) as compared to
R709 million (US$87 million) in the June 2003 quarter. The decrease is due to a
conscious effort to defer lower priority capital at the South African
operations given the current rand gold price.
R289 million (US$40 million) was expended at the South African operations. A
significant portion of this expenditure was directed at the major projects with
R48 million at the 1E and 5E shafts at Driefontein, R29 million on the new mill
installation at Driefontein, R47 million at Kloof 4 shaft and R44 million at
Beatrix 3 shaft.
Major projects are still forecast to be in line with approved votes.
The Australian operations incurred capital expenditure of R159 million (A$32
million), the majority on development of existing projects and exploration to
increase the ore reserve base at those operations. At the Ghanaian operations,
capital expenditure amounted to R88 million (US$12 million), the majority at
Tarkwa on the mill project.
Net cash outflow for the quarter was R1,269 million (US$171 million) after
taking account of the above as well as external loan repayments of R91 million
(US$12 million). The cash balance at the end of the September 2003 quarter was
a deficit of R279 million (US$39 million) as compared to R1,041 million
(US$134 million) at the end of the June 2003 quarter. Debt at the end of
September was R211 million (US$29 million) as compared to R324 million
(US$42 million) at the end of June 2003.
Quarter ended 30 September 2003
compared to quarter ended
30 September 2002
Attributable gold production decreased to 1,038,000 ounces in the September
2003 quarter compared to 1,130,000 ounces in the September 2002 quarter. The
decrease in production was due to the sale of St Helena in fiscal 2003 and the
lower grades encountered at the South African operations. This was partly
offset by excellent results achieved at Agnew, where production year on year
is up 38 per cent from 33,200 ounces to 45,900 ounces.
Revenue decreased 26 per cent in rand terms (increased 4 per cent in US dollar
terms) from R3,964 million (US$382 million) to R2,952 million (US$397 million).
This was due to a reduction in the rand gold price achieved from R104,542 per
kilogram (US$313 per ounce) in the September 2002 quarter to R86,184 per
kilogram (US$360 per ounce) in the September 2003 quarter and the sale of St
Helena, which generated revenue of R111 million (US$11 million) in the
September 2002 quarter. Operating costs were 3 per cent lower at R2,342 million
(US$315 million) compared to R2,402 million (US$231 million) in the September
2002 quarter. Operating cost increases at the South African operations of R168
million (US$80 million) were offset by the impact of translating costs at the
international operations into South African rand at a stronger R/US dollar
exchange rate than the corresponding quarter in the previous year. The average
exchange rate strengthened 28 per cent from R10.38 to the dollar in the
September 2002 quarter to R7.44 in the current quarter. Earnings decreased from
R542 million (US$52 million) in the September 2002 quarter to R421 million
(US$57 million) in the current quarter.
Operational Review
Group overview
Attributable gold production for the September 2003 quarter was virtually
unchanged at 1,038,000 ounces when compared to the June 2003 quarter, of which
approximately one third is attributable to the international operations. The
international operations contributed R217 million (US$29 million) of total net
operating profit compared to R205 million (US$27 million) last quarter.
Production from the Australian operations decreased 2 per cent. This was
despite an increase in tons throughput at St Ives, as the mine increased focus
on the low grade toll milling campaign to boost cash flows, and underground
yields were markedly lower due to this quarter"s mining mix. This is in line
with plan. Net operating profit from the Australian operations decreased 38
per cent to R24 million (US$3 million) for the quarter. Ghana showed an
increase in production of 5 per cent due to an increase in tons treated. Ghana
contributed R193 million (US$26 million), a 16 per cent increase on the
previous quarter"s net operating profit. At the South African operations
production was virtually unchanged at 711,000 ounces.
A decrease of 7 per cent in production at Beatrix due to lower grades was
offset by small increases achieved at the larger Driefontein and Kloof
operations. Net operating profit at the South African operations decreased to
R78 million (US$11 million) mainly as a consequence of the above inflation
wage increases and the treatment of 4 sub-vertical shaft at Kloof as a full
operating shaft and increased tonnage.
Ore milled increased from 10.93 million tons to 11.50 million tons due to an
increase in surface tons, mainly at St Ives and Tarkwa as well as the toll
milling campaign at Beatrix. This resulted in a decrease in overall yield to
3.0 grams per ton, as compared to 3.1 grams per ton achieved in the June 2003
quarter. Total cash costs in rand terms increased to R67,566 per kilogram from
R63,369 per kilogram achieved last quarter as a result of the cost increases at
the South African operations referred to above. In US dollar terms, total cash
costs increased from US$255 per ounce to US$282 per ounce mainly due to the
increases mentioned above and the stronger South African rand. Operating cost
per ton at R204 was unchanged from last quarter, the increase in operating
costs being offset by the increase in tons milled.
South African Operations
DRIEFONTEIN
September June
2003 2003
Gold produced - 000"ozs 289.0 285.9
Total cash costs - R/kg 67,835 63,784
- US$/oz 284 256
Production at Driefontein increased 1 per cent to 289,000 ounces.
This was due to an increase in underground tonnage at a constant yield of 8.1
grams per ton compared to the previous quarter.
Underground tonnage increased to 994,000 tons from 964,000 tons, while overall
tonnage decreased to 1,603,000 tons from 1,624,000 tons due to a reduction in
the lower grade surface material. The decreased proportion of surface to
underground ore treated resulted in the combined yield increasing from 5.5
grams per ton last quarter to 5.6 grams per ton this quarter.
Total cash costs increased by 6 per cent in rand terms to R67,835 per kilogram
from R63,784 per kilogram last quarter. This was due to an increase in
development and underground volumes milled, as well as the effect of the
increased labour costs due to the wage increases. In US dollar terms total cash
costs increased from US$256 per ounce to US$284 per ounce quarter on quarter as
a result of the stronger rand, allied with the increased operating costs.
Operating profit thus declined from R174 million (US$25 million) in the June
quarter to R133 million (US$18 million) in the current quarter. Capital
expenditure was significantly lower at R88 million (US$12 million) for the
quarter compared to R193 million (US$34 million) in the previous quarter mainly
due to timing and a conscious effort to defer lower priority capital given the
current rand price environment.
Despite some teething problems on commissioning, the Driefontein 1 plant mill
installation should achieve design capacities towards the end of the December
quarter. The commissioning and stabilising process will impact on the tons
milled during the December quarter. As a consequence there will be a temporary
build up of ore stockpiles. All efforts are being expended to catch up the
backlog but overall gold production for the December quarter is likely to be
lower. The old comminution section has been shut down and preparations for
demolition are underway.
KLOOF
September June
2003 2003
Gold produced - 000"ozs 262.4 259.7
Total cash costs - R/kg 76,614 70,516
- US$/oz 320 283
Gold production at Kloof was 262,400 ounces, which like Driefontein, was 1 per
cent higher than the previous quarter. This was due to marginally higher
underground grades, which offset the slightly lower underground and surface
mill tonnage. Underground and surface tonnage was 969,000 tons and 278,000 tons
respectively. As surface grades remained constant, the combined yield increased
quarter on quarter from 6.4 grams per ton to 6.5 grams per ton. As a result of
continued losses experienced at the 9 shaft marginal mining and development
project due to the strong rand, the decision has been made to put this shaft
and project on care and maintenance.
Total cash costs increased by 9 per cent in rand terms to R76,614 per kilogram
and by 13 per cent in US dollar terms, from US$283 to US$320 per ounce. The
increase in gold output was offset by the lower gold price and higher costs due
to the increase in labour costs. This resulted in operating profit decreasing
to R55 million (US$7 million) this quarter from R106 million (US$17 million)
last quarter. Capital expenditure was R124 million (US$17 million) for the
quarter compared to R114 million (US$22 million) in the previous quarter. The
Kloof 3 plant pumpcell installation has been commissioned and is operating at
design capacity and extraction efficiency.
Marginal areas are being closed across the mine as a result of the rand
strengthening. Old gold programmes and high grade VCR pillar mining will be
accelerated to offset some of this production loss. Overall gold production in
the December quarter is expected to be similar to the September quarter.
BEATRIX
September June
2003 2003
Gold produced - 000"ozs 159.2 171.1
Total cash costs - R/kg 78,509 68,401
- US$/oz 328 275
Gold production at Beatrix decreased by 7 per cent to 159,200 ounces from
171,100 ounces achieved in the previous quarter.
This decrease was due to significantly lower underground and surface yields.
Underground yields decreased from 5.1 grams per ton to 4.4 grams per ton due to
the mining mix achieved during the quarter.
Mining mixes were adversely affected at 2 and 4 shafts during the quarter. The
constraints at these shafts mainly relate to limited flexibility in stoping
operations. At 2 shaft an increased amount of ledging and equipping on new
raises and stoping areas had to be done during the quarter. The process has
established a number of higher grade panels for the remainder of the year.
Beatrix 4 shaft incurred operating losses of R27 million (US$4 million) during
the quarter arising from the issues referred to below.
An increase in production to historic levels would assist in ameliorating this
loss. At 4 shaft there were delays in a number of raise holings due to the
intersection of geological structures. A number of panels in the high grade
section at 4 shaft also experienced temporary grade declines during the
quarter.
Increased ledging and equipping was done to counteract the effects of these
grade declines and also to improve flexibility. These initiatives should result
in an improvement in grades over the balance of the year.
Surface yields decreased from 1.1 grams per ton to 0.8 grams per ton.
Management focus in this area has resulted in improved underground yields since
quarter end. Interventions made should improve underground yields towards the
reserve grade of 5 grams per ton. The lower yields were partly offset by
increased tonnage.
Underground ore milled increased to 1,054,000 tons this quarter from 1,002,000
tons, while surface tons increased 81 per cent from 182,000 tons to 329,000
tons this quarter. This increase was due to 189,000 tons sent to the
neighbouring Joel mine for toll processing, an increase of 156,000 tons when
compared to the June quarter.
Total cash costs increased 15 per cent in rand terms to R78,509 per kilogram
and increased to US$328 per ounce from US$275 per ounce last quarter. The
increase is due to a lower yield as well as the stronger rand, increased
volumes and higher labour costs.
Operating profit therefore declined from R81 million (US$11 million) to R28
million (US$4 million) quarter on quarter. Capital expenditure decreased from
R117 million (US$21 million) last quarter to R77 million (US$11 million) this
quarter.
In the short term production at this quarter"s level should be maintained.
International Operations
Ghana
TARKWA
September June
2003 2003
Gold produced - 000"ozs 147.7 129.1
Total cash costs - US$/oz 210 213
Heap leach throughput realised record levels at just over 4 million tons for
the quarter while gold production increased to 147,700 ounces compared to
129,100 ounces in the June quarter. This increase in gold production is mainly
due to a 10 per cent increase in the volume of ores treated and a 4 per cent
increase in head grade. Gold in process release contributed some 10,000 ounces
in this period compared to some 7,000 ounces in the June quarter.
The ongoing recovery in gold from the heaps reflects the continuing upgrade of
the solution management systems on the leach pads and the move to lower lifts
on the north leach pads, following the expansion of those facilities.
For the September quarter operating costs increased by 15 per cent to US$30
million (R220 million) in line with the increase in mining volumes. Unit
operating costs decreased marginally from US$7.06 per ton to US$6.95 per ton.
Total cash costs decreased similarly to US$210 per ounce. Tarkwa contributed
US$22 million (R165 million) to operating profit, an increase of 29 per cent
quarter on quarter.
The Tarkwa plant construction is underway and on schedule and is the main
reason for the small increase in capital expenditure this quarter to US$11
million.
Tarkwa should maintain gold production achieved this quarter for the remainder
of this year, noting however the uncertainty in predictin g gold recovery from
gold in process on the leach pads.
DAMANG
September June
2003 2003
Gold produced - 000"ozs 70.1 78.3
Total cash costs - US$/oz 232 223
At Damang, production decreased 10 per cent to 70,100 ounces because of a
decrease in mill throughput, from 1,309,000 tons to 1,186,000 tons. This was as
a result of a planned maintenance shut down in July. Yield was marginally down
at 1.8 grams per ton.
Total cash costs increased from US$223 per ounce to US$232 per ounce quarter on
quarter. The increase in unit cash costs occurred despite a decrease in unit
operating costs from US$14.2 per ton to US$13.5 per ton treated, due to the
inclusion of a US$1.6 million gold in process credit in the June quarter
compared to a US$0.07 million gold in process charge in this quarter,
reflecting the ongoing movement in high value ores through the stockpiles. The
net result was a decrease in operating profit of 6 per cent to US$9 million
(R69 million).
Exploration to increase the current ore reserve continues and R5 million (US$1
million) was included in costs during the quarter.
Capital expenditure once again was negligible.
Production should be marginally higher next quarter as compared to the
September quarter as there are no planned mill stoppages.
Australia
STIVES
September June
2003 2003
Gold produced - 000"ozs 127.0 141.0
Total cash costs - A$/oz 412 347
- US$/oz 271 221
Gold production at St Ives was 127,000 ounces, a decrease of 10 per cent when
compared to the June quarter"s production of 141,000 ounces. This decrease was
due to a 15 per cent decline in average head grades treated, partially offset
by a 13 per cent increase in ore treated from 1,495,000 tons last quarter to
1,688,000 tons this quarter. This increase in treatment volumes was due to a
doubling of the toll treatment program to 173,000 tons, producing 12,000
ounces, and a 113,000 ton increase in heap leach volumes to 715,000 tons for
the quarter, on the back of ongoing optimisation of that circuit and the
treatment of softer ores there. The decline in average head grade was largely
due to a decline in availability of high grade ores from the Junction mine,
following mining difficulties there in the high grade stopes, and a reduction
in volumes of high grade open pit ores from the Argo and Temeraire pits. Argo
reflects its position in the mining cycle while Temeraire has been depleted.
As noted above the mix of ores treated also changed quarter on quarter with a
larger contribution from low grade heap leach ores.
Since the acquisition of this mine in December 2001, the mining mix between
underground and surface has varied considerably. Initially open pits provided
some two thirds of gold treated, but with the current commissioning of the new
Argo and Leviathan underground mines, this mix will move to around 50/50 from
each source by financial year-end. As previously reported the concurrent
commissioning of these mines in this year will put pressure on margins, but in
2005 the benefits of these additional sources of high grade will start to be
seen.
Operating costs at A$51 million (R249 million, US$33 million) were 5 per cent
above the previous quarter due to costs associated with toll treatment and an
increase in ore treated from underground.
Total cash costs were thus A$412 per ounce (US$271 per ounce) for the September
quarter compared to A$347 per ounce (US$221 per ounce) in the June quarter. The
significant increase in total cash costs was expected and will remain a feature
of this financial year with the commissioning of the new underground mines
referred to earlier and the build up in tonnage from the new Mars open pit on
Lake Lefroy. Operating costs per ton reduced from A$33 to A$30 quarter on
quarter. This decrease resulted from the higher cost being more than offset by
the increased tonnage, especially the increase in toll milling. St Ives
contributed A$16 million (R79 million, US$11 million) to operating profit
compared to A$30 million (R148 million, US$19 million) in the previous quarter.
The gold price achieved of A$553 per ounce was similar to the June quarter.
Capital expenditure reduced to A$26 million (R126 million, US$18 million) in
the September quarter from A$29 million (R144 million, US$26 million) in the
June quarter.
The mining mix over the remaining quarters is planned to return yields to
recenthistoric levels and supported by an expansion of open pit mining volumes
and an associated expansion of the toll treatment program, gold production
should improve accordingly.
AGNEW
September June
2003 2003
Gold produced - 000"ozs 45.9 35.8
Total cash costs - A$/oz 372 449
- US$/oz 245 286
Gold production at Agnew increased 28 per cent to 45,900 ounces quarter on
quarter. Production from the Kim and Crusader underground operations were both
above forecast. At Kim (Waroonga underground) volumes increased from 18,000
tons to 47,000 tons quarter on quarter at a head grade of 17.3 grams per ton or
34 per cent above the June quarter. At Crusader volumes were maintained and as
a consequence less low grade surface stockpile was required. This was the main
reason for the increase in reported yield from 3.3 grams per ton last quarter
to 4.6 grams per ton this quarter.
The mine reported a decrease in total cash costs in Australian dollars from
A$449 per ounce (US$286 per ounce) last quarter, to this quarter"s A$372 per
ounce (US$245 per ounce) as a result of the production increase and higher
grades. Operating costs increased from A$13 million (R63 million, US$8 million)
in the June quarter to A$14 million (R69 million, US$9 million) in the current
quarter in line with the increased production. The contribution to operating
profit from Agnew was A$8 million (R41 million, US$5 million) compared to a
negative A$0.9 million (R4 million negative and US$nil) last quarter. Capital
expenditure was little changed at just below A$7 million (R33 million, US$5
million) as exploration and development of the underground operations at
Waroonga continued.
Despite Agnew performing above expectations this quarter it is
anticipated that this level of production can be maintained in the
December quarter.
Capital and development projects
TARKWA
During the quarter design and construction activities on the new mill/ CIL
plant at Tarkwa continued. Detailed engineering and design activities are now
more than half completed. In terms of procurement, the majority of major items
of equipment have been ordered and commitments representing nearly 50 per cent
of the planned expenditure have been made. Construction activities during the
quarter included clearing and preparation of the plant site, excavation of
foundations and commencement of the construction of the primary crusher
foundation. Clearing of the tailings dam site, along with construction of the
haul road to this site, which is required during the construction phase, were
also commenced. The project remains on schedule for commissioning in the
second quarter of the 2005 financial year.
DAMANG
By the end of the quarter the first pass exploration program, which has been
underway for some 18 months, testing the conglomerate hosted gold potential
across the Damang license area was largely completed. While drilling is still
occurring in some limited areas of Tomento and Bonsa, the broad scale potential
is now largely understood. While gold hosting stacked conglomerates were
encountered through much of the 27 kilometre strike length, significant
proportions are unlikely to be pursued further as they offer poor economic
potential due to limited thicknesses and geometries that would make them
unsuitable for open pit mining.
In the areas of Tomento north, Tomento east and Lima South reasonable
continuity and geometry were encountered. Further evaluation is occurring in
these areas although they are likely to represent incremental mill feed rather
than a significant stand alone project. Drilling at Tomento, Bonsa south and
Rex is continuing.
ST IVES
The optimisation and expansion project feasibility study, examining the
viability of installing a new and expanded mill/CIP plant, was largely
completed during the quarter and an investment decision will be considered
during the second quarter of this year. While the exploration program to
support the feasibility study was completed in the June quarter, these
activities on the site have continued, with particular focus on the Greater
Revenge Area and the Argo and Leviathan complexes.
Exploration
New ventures that were concluded during the quarter include a private
placement, joint venture option with Bolivar Gold Corporation on the El Callao
district in Venezuela. The investment in Bolivar amounted to R88 million
(US$12 million) for the purchase of 12.34 million shares giving an interest of
15 per cent. These types of equity placement/joint venture option agreements
have been a winning strategy for Gold Fields. The company has invested over
US$30 million in equity placements that are valued at over US$70 million at
current market prices. Over US$20 million of these gains have been realised.
Aside from these gains, Gold Fields experiences exposure to a variety of high
quality exploration projects without the country set-upcost of entering a new
jurisdiction. These increased exploration and acquisition activities are part
of Gold Fields" response to a more favourable US dollar gold price environment
and outlook.
During the quarter, Gold Fields completed exploration drilling activities on
Arctic Platinum in Finland, the Radius joint venture in Guatemala, the
Committee Bay joint venture in Nunavut, Canada, the St Barbara joint venture in
Western Australia and the Higginsville project in Western Australia.
ARCTIC PLATINUM PROJECT
As previously reported, on 11 July 2003 Outokumpu Oyj announced that it had
concluded a transaction with South Atlantic Resources Ltd., a Canadian junior
mining company, to dispose of its 49 per cent interest in the Arctic Platinum
Project, for a total consideration of US$31 million. In terms of the Arctic
Platinum Partnership Agreement, this disposal was subject to a pre-emptive
right in favour of Gold Fields. On 8 August 2003, it was announced that Gold
Fields would exercise this right. In terms of the agreement Gold Fields paid
US$31 million to acquire the remaining 49 per cent interest, made up of US$23
million in cash with the balance in the issue of 564,841 new Gold Fields
shares. This transaction was closed out during the quarter. The Arctic Platinum
Project is an advanced stage PGM exploration project in Northern Finland. To
date approximately 12 million ounces of PGM resources have been delineated on
the site.
Corporate matters
Black economic empowerment transaction
On 10 June 2003, Gold Fields and Mvelaphanda Resources Limited, or Mvela
Resources, issued a joint cautionary announcement to shareholders, stating they
had reached agreement in principle for a broad based black economic empowerment
consortium, led by Mvela Resources, to acquire a beneficial interest of 15 per
cent in the South African gold mining assets of Gold Fields for a consideration
of R4.1 billion to be paid on completion of the transaction. On 8 October 2003,
Gold Fields and Mvela Resources issued a further joint cautionary announcement
to shareholders stating that it had been agreed to extend the period of
exclusivity provided for by the agreement in principle until 28 February 2004,
for the purpose of completing the conditions precedent to the transaction.
The transaction relates to Gold Fields" current South African gold mining
assets, which include the Beatrix, Driefontein and Kloof mines and ancillary
service companies. Detailed life of mine valuations have shown that the assets
represent approximately 70 per cent of Gold Fields" total value. As such, the
purchase consideration of the empowerment interest has been determined with
reference to this percentage of Gold Fields" market capitalisation, based on
the weighted average traded price of shares in Gold Fields over the 30
business days prior to the date of the initial announcement.
The funding required by the empowerment consortium will be sourced through a
significant equity capital raising by Mvela Resources, the provision by Gold
Fields of vendor financing on commercial terms and the raising of debt by Mvela
Resources for the balance of the purchase consideration.
Mvela is in the process of undergoing a debt raising exercise. A detailed terms
announcement will be made once funding commitments are finalised.
This transaction represents a significant milestone towards meeting the
requirements of the Mining Charter.
Sale of Driefontein"s 1C11 block
On 18 September 2003, it was announced that Driefontein sold the mining Block
1C11 and associated assets to AngloGold, for a cash consideration of R315
million. This block is situated onDriefontein"s western boundary adjacent to
AngloGold"s TauTona mining operation. The profit net of taxation amounted to
R240 million. The sale is subject to the suspensive condition that, to the
extent necessary, the transaction be approved by the Competition Commission.
The Block, only accessible in 10 years time by Driefontein, has an estimated
576,000 ounces of recoverable gold. The value brought forward by this deal will
be used to invest in the current South African operations.
Awards
Gold Fields Limited has received the Squirrel award from the Investment
Analysts Society of Southern Africa (IASA) for "best reporting and
communication" in the resources, diamonds, precious metals and minerals
category for the 2002 calendar year. Gold Fields also received the Samrec/IASA
award for best reporting of mineral resources and mineral reserves according
to the Samrec code for calendar 2002. Samrec is the South African Mineral
Resources Committee. Gold Fields will continue to improve communication to all
stakeholders and other interested parties setting industry standards even
higher than those achieved in the past.
Legal
There have been no further developments to our earlier report in respect of the
law suit filed by ZalumziSingleton Mtwesi ("Mtwesi") against Gold Fields
Limited in the Supreme Court of the State of New York County of New York on 6
May 2003. In summary, Mtwesi and the plaintiffs class demand an order
certifying the plaintiffs class and compensatory damages from Gold Fields
Limited. The suit has not been served on Gold Fields Limited. If and when
service of the suit takes place it will be vigorously contested. Gold Fields
Limited will keep shareholders appraised of any future developments in this
matter.
Mineral resources and reservers
On 2 October 2003, it was announced that both Gold Fields" attributable
mineral resources and reserves for the fiscal year ended 30 June 2003 have
increased. Attributable resources have increased from 186.0 to 195.3 million
ounces and attributable reserves have increased by 3.0 million ounces to 81.5
million ounces despite depletion of 4.7 million ounces (attributable gold
produced 4.3 million ounces) during fiscal 2003. This net increase in reserves
reflects on the focus of organic growth and exploration within Gold Fields.
Annual Report
The financial statements for the year ended 30 June 2003 were approved by the
directors on 8 September 2003. A copy of the Annual Report was subsequently
forwarded to all shareholders, together with the first ever Sustainable
Development Report for the year ended 30 June 2003. This report has been
compiled utilising the Global Reporting Initiative guidelines as well as those
of the Global Mining Initiative. Our social development and fulfilling the
requirements of the Mining Charter are key corporate priorities going forward.
Outlook
Gold production is not expected to be materially different in the December
2003 quarter. Should the rand gold price remain at current levels, revenue and
operating margins will continue to be under pressure. The lower operating
margins currently experienced at the South African operations have
necessitated a change in mining strategy at the South African operations
resulting in a reduction in marginal tonnage and a review of paylimits. In the
short term, notwithstanding the review of paylimits, efforts are being made to
increase production through increased quality volumes and focus on the
recovery of old gold. In the longer term efforts are being made to increase
productivity.
At current exchange rates there should not be a significant gain on the
Australian dollar currency financial instruments in the December quarter. No
significant asset sales, which boosted profits in the last two quarters, are
contemplated during the December quarter.
Basis of accounting
The unaudited results for the quarter have been prepared on the International
Financial Reporting Standards (IFRS) basis. The detailed financial, operational
and development results for the September 2003 quarter are submitted in this
report.
These consolidated quarterly statements are prepared in accordance with IFRS
34, Interim Financial Reporting. The accounting policies are consistent with
those applied at the previous year-end.
Income Statement
International Financial Reporting Standards Basis
SA RAND
(Figures are in millions unless
otherwise stated)
Quarter
September June September
2003 2003 2002
2,952.4
Revenue 2,970.7 3,963.5
Operating costs 2,341.8 2,223.8 2,402.2
Gold inventory change 40.8 29.7 (16.4)
Operating profit 569.8 717.2 1,577.7
Amortisation and depreciation 298.8 306.4 341.9
Net operating profit 271.0 410.8 1,235.8
Finance income/(cost) 21.9 94.8 (38.8)
- Net interest received and
investment income 20.8 28.6 33.0
- Gain/(loss) on foreign debt, net of
cash 1.1 66.2 (71.8)
Gain/(loss) on financial instruments 36.4 311.4 (201.9)
Other income/(expense) 12.4 (20.1) 11.0
Exploration (55.1) (100.4) (45.5)
Profit before tax and exceptional items 286.6 696.5 960.6
Exceptional gain 204.5 271.7 -
Profit before taxation 491.1 968.2 960.6
Mining and income taxation 37.3 151.1 385.7
- Normal taxation 47.8 (8.4) 288.7
- Deferred taxation (10.5) 159.5 97.0
Profit after taxation 453.8 817.1 574.9
Minority interest 32.6 27.7 33.2
Net earnings 421.2 789.4 541.7
Exceptional items:
Sale of mineral rights 187.2 - -
Profit on sale of investments 16.1 301.8 -
Retirement of health care obligations - (26.7) -
Other 1.2 (3.4) -
Total exceptional items 204.5 271.7 -
Taxation 52.3 (1.7) -
Net exceptional items after tax 256.8 270.0 -
Net earnings per share (cents) 89 1 |