Gold Fields Ltd (GFI) 2003 Q4 法說會逐字稿

Good morning, ladies and gentlemen and welcome to your Gold Fields Limited year end results conference call. At this time all parties have been place on a listen-only mode and the floor will be open for your questions and comments following the presentation.

Before we do begin, I'd like to remind you that statements in this conference call concerning the company's business outlook or future economic performance, anticipated profitability, revenues, expenses or other financial items and product line growth together with other statements that are not historical facts are forward-looking statements, as that term is defined under Federal Securities Laws. Forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those set forth in such statements.

Such risks, uncertainties and factors include but are not limited to, foreign business risks, industry cyclicality, fluctuations in customer demand and order pattern, the seasonal nature of the business, changes in pricing and general economic conditions as well as other risks detailed in the company's filings with the Securities and Exchange Commission.

It is now my pleasure to turn the floor over to your host and Senior Vice President of Investor Relations, Mr. Willie Jacobs. Sir, the floor is yours.

Thank you very much, Dante. Ladies and gentlemen, thank you very much for joining Gold Fields today for our fourth quarter and year-end results.

Before I hand over to Ian Cockerill, let me just remind you that on our website there is a recording of our market presentation which was done in Johannesburg this morning. Also on the website is a webcast which went out live this morning. You can access that at Gold Fields.CO.ZA.

I am now going to hand over to Ian Cockerill, our Chief Executive Officer.

Thanks very much, Willie. Good afternoon or good morning, everybody and welcome to the fourth quarter and the year-end results teleconference call for Gold Fields.

Today I have with me, as usual, Nick Holland, the CFO, Mike Prinsloo, Executive Vice President of South African Operations and John Munro, our Senior VP for International Operations. We'll follow the normal format with myself giving a short introduction followed by Nick reviewing the financials and then Mike and John will talk to their respective operational areas, after which I will summarize and then we'll open up for some questions.

Firstly, let me talk about the year, or the past year. In short, it's been an excellent year for Gold Fields. In fact, I will characterize this year as one where we were able for the first time to reap benefits from the variety of initiatives that we've put in place over the recent years consequently, finding ourselves positioned to regularly produce better quality and consistent results. I summary, we've had a record production of 4.33 million ounces for the year that's 5.5% up year on year.

We've had excellent earnings for the year of $326 million despite a much stronger rand/dollar exchange rate and that compares with $301 million in fiscal year 2002. We've kept a tight lid on our costs, particularly in the high inflationary environment of South Africa and for the group as a whole, the low cost per kilogram was up 9% that has to be seen against a backdrop of overall 9% decrease in grade for the group.

As for the plan, we've increased our capital investments and last year spent $284 million on capital, most notably in Ghana where the Tarkwa expansion was approved. We are particularly pleased with this because this has now positioned Tarkwa to be able to grow forward at higher levels of production than it currently is doing but importantly, to do that well into the next decade.

We've also increased our exploration spend with a range of new interesting projects in South Africa, Australia, Asia and South America and, importantly, we successfully negotiated a empowerment deal with Mvelaphanda Resources whereby they would acquire a 15% beneficial interest in the South African assets of Gold Field.

Moving on to the quarter, I think it will be fair to say that as good as the year has been, unfortunately the last quarter was an extremely tough one. Production was only off 30,000 ounces to 1.04 million ounces the stronger Rand certainly has hit our operating profit and reduced it by in total 36%. However, cost control, and particularly in South Africa where unit costs were only up 2%, was exemplary. Nick will obviously talk about this in more detail later on.

We've also had opportunities in sales of non-core assets and that, allied with a positive mark to market evaluation of the Australian dollar currency hedge, helped us achieve earnings at $98 million for the quarter and pay a final dividend for this half year of 100 cents South African to supplement the interim payout of 150 cents that was made earlier on this year. Unfortunately, we did have some operational shortfalls at Kloof but these were offset by excellent performances coming up from the Australian operations, particularly St. Ives and both Mike and John will talk about those later.

And finally, the sale proceeds of these non-core asset has enabled us to reduce our outstanding debt by $94 million in this last quarter and now our outstanding debt obligation stands at $42 million. With that brief synopsis, I'll hand you over to Nick.

Thank you, Ian. I'm just going to go through the quarterly results briefly and then, even more briefly, just talk about the year's results.

Revenue for the quarter was $383 million compared to the previous quarter's revenue of $397 million with the decline due to a 3% drop in our production to 1,041,000 ounces and also due to the slightly lower price achieved of $343 an ounce compared to $353 an ounce in the previous quarter. Operating costs increased from $256 million in the March quarter to $281 million in the June quarter and this is due to an 8% strengthening in the Rand dollar exchange rate from 8 Rand 38 in the March quarter to 7 Rand 74 in the June quarter and also due to higher costs at the international operations due to a 4% increase in gold production quarter on quarter.

Notable achievement for the quarter is that our cost per turn was flat quarter on quarter and if you look at the total year, our underground cost return only went up 2.6% year on year. So, we have had a real reduction compared to the inflation rate in South Africa. In fact, if you look over the last six years, the average compound has increased in our Rand percent costs is only 3.5% compared to the annual compound of increase in PPI over the same period, which is more than double that.

Operating profit for the quarter was reduced from $135 million in March to $100 million in the June quarter with amortization similar to the previous quarter, net operating profit was $61 million compared to $95 million in the previous quarter. During the quarter, the Australian dollar again strengthened from 59.4 U.S. cents to 56.2 U.S. cents, a gain of 6.8 U.S. cents. This compares to a gain of 3.1 U.S. cents in the previous quarter. This has resulted in a gain on foreign debt of $7.5 million for the quarter compared to $5.5 million in the previous quarter and has also resulted in a gain on financial instruments of $35 million compared to $19 million in the previous quarter.

Market to market value of our Australian dollar currency financial instruments was $69 million at the end of June compared to $48 million at the end of March. We have reduced these positions from $400 million at the end of March to $300 million at the end of June, not just through the normal quarterly maturities, but also due to a conscious effort to close out part of the hedge and to release some of the value in the hedge. We thus generated some $24 million in cash as a consequence of that and that's been applied to offshore debt reduction.

Exploration also increased from $3.7 million in March to $11.6 million in the June quarter. This is partly due to a write-off of $4.5 million in respect of costs incurred in previous quarters on exploration farming ventures where ownership not yet vested. A conservative accounting practice has been followed as in terms of cap ex, we could have capitalized this. Not withstanding this deliberate decision has been made to step up expenditure in this area as it's seen as a very cost effective way of growing the business for the long-term.

Exceptional assets for the quarter were $31 million and were comprised of profits of $34 million from the sale of investments, offset by exceptional health care costs of $3 million. The investments disposed of related to the remaining interest in El Dorado, almost all of the remaining interest in [Glumskulls] and around about 20% of our all gold investment. These disposals generated net proceeds of $51 million. These were sold as they were seen as non-core holdings and we felt we could redeploy the proceeds into debt reduction on our core operations, which for us was a much better use of proceeds.

Net earnings were $98 million for the quarter, or 21 cents a share compared to net earnings of $93 million or 20 U.S. cents a share in the previous quarter. Net earnings excluding gains on financial instruments and foreign debt as well as the exceptional items were $34 million compared to $58 million in the previous quarter with a reduction mainly due to the Rand strength experienced during the quarter.

A notable achievement during the quarter was a reduction in our offshore debt by $94 million from $136 million at the beginning of the quarter to $42 million at the end of quarter. This was financed from $42 million generated from sales of offshore investments, $24 million from the closeout of currency hedges and the balance from existing offshore cash resources.

Of the debt outstanding at year-end, $29 million relates to Australia with the balance linked to the [INAUDIBLE] mine. In total we've reduced our debt from $182 million at the beginning of the year to $42 million at the end of year, a reduction of $140 million. Despite the significant reduction in debt during the year, our balance sheet remains strong with cash net of debt being $92 million at the end of year.

In addition, we still have cash in the form of liquid investments which comprise the bulk of our investments, of $65 million U.S. dollars and our Australian hedge book, despite the reduction from $400 million to $300 million, still has a positive mark to market value of $69 million U.S.

Looking at the year's results briefly, production for the year increased 5% to 4.3 million ounces, which is a new all-time record and this is mainly due to the acquisitions in Australia and Ghana which were accounted for full year in 2003 as opposed to only part of the year in 2002. Increased production together with the gold price increased from $292 an ounce to $333 an ounce in 2003 resulted in operating profit increasing 11% to $542 million for the year.

Earnings for the year were also impacted by a step up in exploration, $9 million in 2002 to $23 million in 2003, as you heard earlier, a conscious effort to increase expenditure in this area. Net earnings for the year then, notwithstanding this increase from $301 million to $325 million or from 65 U.S. cents a share to 69 U.S. cents a share. Those our highlights of the quarterly and year results.

On that, I'll hand you over to Mike Prinsloo to go through the local operations.

Thanks, Nick. Good morning, ladies and gentlemen.

Starting with safety, 2003 has delivered the best safety performance since the group's inception in 1998 with our improvements well below the industry average on most safety measures. In the quarter, Beatrix achieved 2 million in safety measures and Driefontein 1 million [INAUDIBLE]. On the environmental side, all operators were successful with the ISO 14,001 recertification and Driefontein and Beatrix received excellence in mining and environmental awards during the quarter. Overall, for the quarter we've had another difficult and challenging quarter in the South African operations with all the public holiday interruptions, the wage negotiations and abnormally high seismicity, especially across Driefontein and Kloof. Kloof, in particular experienced a drop off in the case of mining on slope at numbers 3, 4 and 7 sharp adversely affecting the gold production for the quarter. Free State had a solid quarter and Driefontein had a steady quarter with the surface strait lower than the previous quarter.

Turning to deliveries of goods, we managed to control our unit cost at all operations well, although utility costs were up due to the low kilogram and cost in U.S. dollars increased due to the strength of the Rand. Capital programs are all on track and expenditures for the quarter and for the year were as per planned.

For the quarter, the South African ops produced 717,000 ounces. Total production costs of $295 an ounce and we spent on our capital projects $76 million U.S. dollars Restructure continues at all our prices in order to drive down the limits despite the margin squeeze that the Rand has brought on our operations.

For the year, we produced 3.08 million ounces of gold at a total production costs of $234 U.S. amounts. We spent $175 million U.S. on capital programs and although, as Ian mentioned, underground grades declined by 9% this was counteracted by a 10% improvement in stoking volumes and South African volumes were up slightly year over year to 19%. So, overall this was a good year.

In terms of Driefontein, Driefontein produced for the quarter 396,000 ounces at a cash cost of $256 an ounce resulting in an operating profit of $25 million U.S. For the year, Driefontein produced 1.24 million ounces at $203 U.S. Square meters were up and developed meters were up with excellent cost control maintained throughout the year.

During the year we commissioned the number 2 north plant project and are currently in the process of commissioning the number 1north plant project at Driefontein. Driefontein's operating profit for the year rose to $149 million U.S., a good year.

Turning to Kloof, we produced 260,000 ounces for the quarter at Kloof at a cash cost of $293 an ounce. A tough quarter for Kloof because of the dried replant which resulted in an operating profit of only $17 million U.S. dollars for Kloof. For the year, Kloof had an excellent year producing 1.14 million ounces at a cost of $215 an ounce.

The number 9 shaft and PD shaft projects that we started during the year and 4 shaft at Kloof has been repositioned to take advantage of the investment made in the last 18 months. The TB seismic activity across the Kloof extension in the post 2 area are also underway and started last Monday. Operating profit for the year was $123 million U.S. dollars for Kloof.

If we look at the depth extension projects, all the depth extension projects across South Africa operations are under feasibility at the moment and should be completed towards the middle of next year. All these depth extension projects in South Africa will depend on the Rand's long-term strength.

Turning to Beatrix, Beatrix produced 171,000 ounces for the quarter at $275 an ounce resulting in an operating profit of $11 million U.S. dollars. For the year, Beatrix produced 660,000 ounces at $229 U.S. amounts for the year, but very pleasing development of volume year on year at 55% with flexibility for number 3 and 4 shafts to perform in this current fiscal year. Beatrix for the year made 59 U.S. profit, a solid performance for the quarter and for the year.

In conclusion, a very challenging quarter on the South African mines in the operation being sure of consistent delivery for the September and December quarters and to continue to reposition ourselves to manage the margin squeeze impacting all our pricings. We have to improve further on our quality and productivity measures and add further flexibility to make our mines more efficient. We have to do this in order to uphold the additional burden that the Rand and the [White] settlement has brought onto the margins. We've been there before when the gold price went down to as low as $215 an ounce and we'll respond accordingly.

We have excellent teams in place and this time around I believe the operations are a lot better positioned for the challenge that margin squeeze challenge that has been brought on us. Managing the [INAUDIBLE] swings and ensuring that mining [INAUDIBLE] are the biggest short issue challenges.

I'll now hand over to John for the international operations.

Thank, Mike, and good morning.

It was a good quarter for international operations, particularly in the Australian mines and less so in the Damang operations. For the quarter, the international operations produced some 324,000 ounces attributable to gold fills at an average total cash cost of $225 U.S. dollars an ounce. Production is up from 308,000 ounces in the previous quarter.

At the moment international operations are contributing something like just under a third of total production. For the year, the international group contributed just under 1.3 million ounces to Gold Field's ounces.

Moving on to the individual operations and starting with our Tarkwa mine in Ghana, total volume was down slightly quarter on quarter on the back of some production interruptions due to power outages and maintenance, nothing particularly substantial.

Gold production was down slightly to 129,000 ounces against 136,000 in the previous quarter. This was really on the back of a slightly reduced level of gold being released from GIP on their leach pads.

In the March quarter we reported the release of some 11,000 ounces that was down to 7,000 ounces released GIP in the period of June. Total cash cost slightly up at $213 an ounce, and that is only due to an increase in grade control drilling during the quarter, which increased the U.S. dollar costs. Operating profit from Tarkwa for the quarter was at $17 million represents about 17% of operating profit.

For the year Tarkwa had a very good performance producing 540,000 ounces at just over $190 U.S. dollars an ounce: highlight of the year being the commencement of the expansion plan there but in particular the ongoing very good performance from the leach pad which contribute confidence in the future of this operation. In the three of four quarters in the last year we managed to draw GIP down, which is particularly important as GIP extends the risk of most operations worldwide. Operating profit for the year was some $74 million U.S. from Tarkwa, about 14% of the gold for the group.

Important to note is that Tarkwa and our Damang operation are the only ones that are able to give us full exposure to the high gold processing at the moment, not being affected by the varied degrees of the currency market. In terms of outlook, we look to maintain these sort of outlooks for the Tarkwa operation and look forward to ongoing good cost control.

Moving to Damang, the other operation in Ghana, is up 6% quarter on quarter that is with the ongoing optimization of the north plant and in fact, year on year we were up some 15% in terms of production there. An excellent job by the team at Damang.

Gold volumes were stable during the quarter and total cash costs slightly down to $223 U.S. dollars an ounce and that's on the back of the June quarter, including a GIP credit on the back of some high grade oils at the stockpiles as a result constraints on hard oils. Operating profit from Damang at $10 million, around 10% of the group profits. Again a solid year from Damang, like Tarkwa, in the year to June using just short of 200,000 ounces at $243 an ounce, very much on plan, although us having to offset some of the lower grades from some old stockpile that is being counted, work force optimization and a pretty good performance from the newly-established [Quake Cayima] open pit.

In terms of Damang's grade in the coming year will be flat to slightly down, in line with ongoing reserve there and we look to stabilize ongoing efforts from that operation.

In Australia, total tons treated to 1.5 million tons on the back of an 80,000-ton campaign in the quarter as well as increased volumes for the [inaudible]. You will recall in the March quarter, with he had some downtown as [INAUDIBLE] gold sold up very nicely to 141,000 ounces in the quarter. And that on the back of the increased volumes, but also some much better grade to the milling plant on the back of better grade end volumes from the Argo and Anticline open pits at St. Ives.

Total cash costs slightly up to 238 Australian dollars an ounce versus 336 in the previous quarter that's on the back of the cost associated with [INAUDIBLE] which will generate decent cash flow.

It's not that high a margin in terms of measured in total cash costs but also during the quarter we started the commissioning of some of the new underground mines at St. Ives associated with high unit costs. We look to improve those in the future. Operating profit at $19 million U.S., similar to Tarkwa for the quarter, and represents 20% of the group profits.

For the year, St. Ives performed as we had expected producing 513,000 ounces at $223 Australian an ounce total cash cost. That's very much in line with our current expectation from this mine, although we look to improve that going forward. Operating profits for the year were some $76 million U.S. dollars, 15% of the total group.

In terms of outlook in this coming year we look to maintain on average the gold production levels we achieved during the '03 financial year. The volumes achieved in this last quarter will be difficult to match on an ongoing basis. So, the story is really that line is producing according to plan and we're very happy with its performance.

Finally on to Agnew, a slightly less satisfactory story there. During the has quarter we indicated that at quarter end we had a movement in the face above the portal which gives us access to the Kim underground mine, our most important source of high-grade oils at Agnew. We lost 10 days of mining at that mine, which is cost significant in the quarterly period. However, the results suggest that on average a slight improvement in volumes. Gold was essentially flat quarter on quarter and total cash costs down versus the March quarter.

Agnew had a disappointing year, only producing 144,000 ounces at a total cash cost of $477 Australian dollar and ounce. That's on the back of a disappointing performance in the urban pit campaign although that is not completed as well as ongoing difficulties which increase the the costs for that mine.

Highlights for the year is certainly the establishment of the new Kim underground mine which is now well established and producing on a very solid basis. And we look forward to the production from the Kim underground mine going forward at Agnew.

Finally, on the international development projects, in the last quarter we announced that we'd approved the expansion of the Tarkwa operation at a total capital cost of $$160 million U.S. dollars made up of the mold construction as well as the conversion to under mining.

On both projects we have project teams established. In the case of the mold construction, EPC and contractors have been appointed. Initial ordering is underway and earthing commenced on site while at the under mining process, final fleet selection is underway at the moment as well as negotiation on the purchase and mark contract. So, very much on the road and we look forward to the commissioning of the Tarkwa mold during the end of the calendar year.

At St. Ives, the optimization project feasibility in underway at the moment, we're to complete that in the first quarter of this current fiscal year. That's looking at a replacement of the existing milling facility was a new plants around 4 million per annum.

That project has been heavily supported by the extensive exploration program underway at the moment where we spend in excess of $15 million Australian. Exploration success have been significant, in excess of our expectations, in fact, for the year we have been able to replace the [INAUDIBLE] in current production and in fact, add another year to the reserve level. So, a very satisfactory performance there.

The exploration at Damang is continuing quite aggressively. We're into a substantial review phase now, reviewing all exploration coming out of the last financial periods and we look to undertake pre resource development look, having a look at economic development scenarios really with a view to assessing can we see the opportunities for a mine developing, a new mine developing at Damang. And we should be able to report on progress there at the end of the September quarter.

Finally, at the end of quarter there was some news regarding the Arctic Platinum project. Outokumpu are 49% partners in the Arctic Platinum project announced that they completed a deal with South Atlantic Ventures, a Canadian Junior Miner, to sell their interest for some $31 million U.S. dollars made up of $23 million of cash and $8 million of marketable securities.

The conclusion of that transaction triggered a preemptive rise in favor of gold yields and we have some time left in which to either wait or exercise that preemptive right and we're having a very hard look at whether that's an opportunity we wish to pursue. Thank you very much.

John, thank you. So, I guess the question is now where to from here?

As we mentioned in the previous quarter's teleconference, the Rand has remained firm, much as we expected and that's been boosted by the higher real interest rate differential that exists between South Africa and our major trading partners. We believe the gold yield to the Rand is likely to remain fairly firm for the balance of this character year, but will likely soften towards the end of the year and into the second half of our fiscal year, early 2004, as the interest rates arbitrage between the two areas start to close off.

In fact, we've assumed that we're going to receive a price of 85,000 Rand a kilogram for this planning year, and accordingly we've positioned the company to deal with this weaker price scenario.

In conjunction with the recently negotiated wage increases and the current stabilization of the Australian dollars to the U.S. dollar, the stronger Rand will likely have a bouncing effect on earnings in the quarter ahead. Nevertheless, we feel the global financial scene is still positively inclined towards gold, so we will continue with our exploration programs and the assessments of the organic growth projects. As you heard John say, we're on schedule to report back on the entire optimization plan by the end of this quarter and we're very confident of a positive outcome with regards to this expansion project.

Just getting back briefly to the wage negotiations, there's no doubt that we need to seek a new paradigm for wage settlements. We cannot continue with the type of what I will call 1980's confrontational type of wage negotiations. We need to move on. We need to seek a new way of getting wage settlements. I would like to see it based both on productivity, profitability, but most importantly, sustainability. There's no doubt that continuing to grant wage increase takes are well in excess of CPI is not sustainable in the longer term and despite good productivity improvements that we have achieved within Gold Fields over the last couple of years, these no doubt in my mind that we do need to see this new model because I would not like to see us having to go through some of the wage negotiation periods that we had this year.

Onto the Mvelaphanda deal, progress has been made with the financing plan but unfortunately, at this stage no firm details can be disclosed because we're still in negotiations. However, both Mvelaphanda and Gold Fields have independently held international road shows where we've explained the rationale behind the deal and it would be fair to say that those companies have come back, having experienced very favorable reception to this plan. While we're very relaxed about consummating the deal, there's no doubt that this is extremely complex in nature and certainly it's going to require time for effective closure. So, we had originally hoped that we would be able to con include this within 120 days, I think it will be fair to say it's going to take somewhat longer.

Gold Fields is probably now reaping the benefits of the major inroad investment program that we initiated over the previous years, and there's no doubt that in the challenging times ahead, this repositioning and rejuvenation of the company is certainly going to offer a significant competitive advantage. If one looks at where Gold Fields was in the dark days of 2000, at low gold prices and not in particularly good shape, there's no doubt that today we are in far better shape to deal with any tough times that lie ahead of us.

So, I'd like to thank you all for your support during the past year. It's been both exciting and demanding, but we now move onto fresh challenges for the new fiscal year with the knowledge that Gold Fields is in good shape, financially sound and is well-prepared for what promises to be a very positive gold market. And with that, I'd like to hand it over to questions.

Thank you. The floor is now open for questions. If you do have a question, on a comment at this times please press 1 followed by 4 on your touch phone phone. If at any point your question is answered, you may remove yourself from the queue by pressing the pound key. Once again, ladies and gentlemen, if you do have a question or a comment at this time, please press one followed by four on your touch tone telephone.

Our first question is coming from David Malalou of Scotia Capital.

Thank you very much. Good afternoon, you guys.

Just some questions with regard to Driefontein and Kloof on reserve grade and head grade from the underground mining operations. I personally seem to be getting the head grade a bit lower than the reserve grade on an ongoing basis. I was wondering whether or not I'm doing something spectacularly wrong and there might be revisions of the grades going forward?

Hi, Dave this is Mike speaking. No, I think if you look at the life of mine grades for both Driefontein and Kloof, they are slightly higher than we repositioned now because it includes the shaft extensions. But I think if you take the average grades of this past year, those are pretty accurate grades that one can use. We've seen the drop off at Driefontein the last few quarters and we've seen the drop off at Kloof now. So, there has been a drop off but they're pretty stable at slightly higher levels than we've seen this quarter.

So, for Driefontein going forward, would you be comfortable with and underground yield of about eight grams per ton going forward?

Just under 8 and with surface makes about six.

Okay. One other question with respect to the Australian acquisitions. There's not been a lot of talk with respect to the progress with regards to exploration. Do you want to make any general comments on that?

Yeah. I think the situation, the focus of the exploration effort on the newly-acquired assets although that's getting on for 18 months now, has really been materialized and that's with a view towards supporting the expansion of that operation.

At the moment we're spending about $30 million Australian a year and that is really focused on opening up the property as well as the new oil reserves. To give you a sense of the level of success from that program, over the last year have been able to replace [INAUDIBLE] depleted from reserve and in fact add another year to reserves. So, we're moving forward at a pretty rapid rates in terms of discovery, so we're pretty satisfied with the results at St. Ives in particular.

Those are obviously able to step out and extend the reserves that way. Have you done anything in terms of going out into the middle of the lake and checking things out there? Because that's effectively virgin ground, isn't it?

It is. And really, against the background of the exploration j, our focus has been to try and make some easy hits. As a result a very large chunk of that exploration has been on the Greater Revenge area which was in a semi-established mining position at the time we took over that property.

So, we focused on expanding that position first rather than trying to get into some newer areas but we do have an entire pipeline of projects which centers around Revenge but also starts to get into the new areas. But at the moments we're really focused on trying to grow the reserve. Okay. Thank you very much.

Thank you. Our next question is coming from John Doody, a Gold Stock Analyst.

Good morning, gentlemen. My question relates to the sale of the 15% of the South African mines to the South African Empowerment Group. And the question I ask is what can you do with the money? Do you expects any restrictions? Can you use it outside of South Africa or will it have to be used inside?

John, the the proceed would be -- we could use the proceeds as long as we comply with normal exchange control restrictions. As you know, we can go and use South African-based money for African projects up to 2 billion Rand.

We can use South African source money for non-African-based projects up to a billion Rand plus 10% of the excess over a billion Rand. And there's no doubt that a large chunk of this money that comes into us from the deal will be consumed, possibly in Katarfa as well as into the Australian exploration and we will be starting to use it elsewhere on an opportunistic basis.

So, there's certainly no lack of opportunity to be able to spend that money. We can certainly put it to good use and it is our intention to use that money to reinvest in the business. What I would characterize it is harvesting our mature assets that are basically cash cows, harvesting them, selling them and taking those proceeds and investing it hopefully into growth projects so that the company can continue to grow. That will be our intent.

All right. Great. So, by your comments I'm guessing that most of it will be deployed outside of South Africa?

Not necessarily.

Okay. Thank you.

Again, ladies and gentlemen, if you do have any further questions or comments, please press 1 followed by 4 on your touch phone phone. Our next question is comes from James Copeland of Goldman Sachs.

Good afternoon, everybody. John, perhaps to expand on your answer before at St. Ives, where has results been as far as additions, has it been at Revenge or Victory or elsewhere?

The bulk of additions are at Revenge and that is expanding existing as well as filling the gaps between them. But some of the answers have already come at the Yarborough underground mine where we are developing infrastructure there at the moment that is a lot of putting into positions. So, some of the growth has come there as well as bits and pieces in the property but the bulk really is at Revenge because that is where most of the money went in.

Great. And in terms of looking forward this year, what's roughly the mix of underground to surface you're respecting at St. Ives?

The volume of ounces is about 2 to 1 from surface and underground. In terms of underground volumes, we will mine about 5 to 6 hundred thousand tons from the underground mines to the tune of 3.1 million tons a year.

Right. And I guess more generally, are you able to provide any guidance for the full year 2004 in terms of production and costs across Garfield's even in local currencies, as well, please?

James, we wouldn't like to do that at this stage other than to say that I think in broad, general terms you'll be looking at a similar level of gold production.

Obviously costs in local currency terms will go up slightly, but we intend to try and pull back as much of those wage increases as we can through productivity improvements. I think if you look at the track record of Gold Fields over the last couple of years, we've been particularly good at beating South African inflation and we would certainly intend to do that going forward.

Great. And perhaps just finally, throughout the process of the wages negotiations, was there any distraction, I guess, on-site such that there was a decrease in productivity or something that might at all affect the quarterly production from South Africa for the first quarter of '04?

James, it's Mike. No, I think the mood leading up to the final sort of week away from negotiations were sort of in conflictual but immediately after the announcement was made that there was a settlement, people just went back to normal.

So, we will work very hard over the next two weeks and communicate with the total work force to make sure that, you know, any damage that was caused in relationships is immediately fixed. We have these transformation programs and team-building processes that we take the work force through all the time on a continuous basis and we will do so. So, I don't see any influence on the first quarter on the new financial year.

Thanks very much, Mike. Thanks, everybody.

Thank you. Our next question is coming from Dave Kusmanich of J. P. Morgan.

A question for Ian. Is it possible to give us more details on the Mvelaphanda relationship, perhaps in terms of timing, contribution and possibly financing?

I think I'll let Nick answer that one.

There's always some issue that we are in the process of working through the various financing options and we've got investment bankers and lawyers working around the clock on this.

We did say last time that Gold Fields would put $300 million Rands of available financing into the deal, that still holds. We also indicated that Mvelaphanda will do an equity raising to fund part of the purchase price, that still holds.

Once we've buttoned down the financing for the balance of the consideration, we'll be in a position to announce detailed terms and as I said, we will hope to do that as soon as we can. I think Ian mentioned earlier on that the timetable on this is not strictly in our hands.

We are reliant on the timetables of the various funding parties who are looking at this deal and have to work through their due diligence. So, as soon as we have more facts, believe me, we'll be out there to tell people.

Many thanks.

Sir, does that complete your question?

Yes. Thank you.

Thank you. Our next question is coming from Barry Cooper of CIBC.

Yeah, a question on Kloof. I guess if we look back a year ago, the grades that at Kloof took quite a hit in terms of reinterpretation of them. Then we had the mine manager depart a few months ago and now we're seeing grades quite a bit lower. When you look at Kloof from afar, it looks like a pretty funny story.

And I'm just wondering if there's something there that you want to kind of tell us that suggests that maybe this deposit's not on a one-way ticket going down hill here.

Barry, it's Mike, absolutely not. I think Kloof is actually being repositioned very well to go forth on a very stable basis. You know, we used the first three quarters of this year and then pushed an accelerated development programs. The fact that we had a bad quarter on rates this quarter is linked to the softness on the BCI slope interiors and sort of formations and it just happened that we were mining excessive amounts of volume out of the slope areas.

It was planned, but we didn't actually believe it would all come together in one quarter. We've come out of the slope areas, or most of them, and we've backed into some of the terrace areas at much higher grades. The next two quarters well re restore some of the grade at at that level we'll go forward on a pretty stable basis.

We have converted the the mining method from a old long wall to a more fast paced more conventional mining method. And in that way in opening up more ores it will be a lot more flexible to manage the grade swings a lot more stable going forward than in the past.

So, I shouldn't, you know, jump to the conclusion that these three incidences are in any way, shape or form related, I guess?

Barry, it's Ian. Trying to link Neil leaving with the grade going down is a total and utter misconception. Neil left us to, really to look after his own investments.

Neil got lucky, made a truckload of money on a piece of ground that he sold to Africaan Lease and has gone to Africaan Lease where he is now the 11% beneficial owner of that company and is looking after his own asset. I've got no doubt in my mind that the grade drop is nothing do with the change in management. It would have happened even if Neil had been there.

And as Mike said, we're seeing ourselves coming out of this short-term blip and as he said, over the next quarter we're likely to get the recovered grades to that particular mine close to 7 grams a ton and probably in the quarter after that going slightly over 7 grams a ton. It is something I am not unduly concerned about.

Yeah, I didn't mean to overplay the importance of Neil to the operation, although I think he was a key guy. But the fact that, you know, grades dropped a year ago, then we saw a drop on the reserve front, then we saw his departure, then we saw grades dropping in actual production just suggests a trend line there that needs to be clear in my mind that it's not all related to one and the same thing.

I think, Barry, just to conclude that point, it's also fair to say that if one looks at Kloof, the high grades at Kloof are very much associated with what we would call the older portion of Kloof, the one shaft, the two shafts, and certainly the three shafts. Many of those long cores starting to go haul out so that the higher grade core of Kloof is now becoming substantially less than it was even just a couple of years ago.

And as we move to 7 shafts and 4 shafts and the deeper areas of 3 shafts, you do have an inherently low grade and more variable ore body and you'll see an increasing percentage of production coming from these lower grade areas. It's quite natural that you're going to see that grade decline. But quite frankly, we don't have the luscious high grades that existed over previous decades regrettably. I wish we did.

Okay. Thanks. Ian, what kind of productivity improvement plans do you have to do battle with the wage increases as well as the inflation? You talked about making some improvements there, but could you just elaborate on that a bit?

Yeah. We did -- last year we had high single digit productivity improvements on our South African operation and Mike has been cast with coming up with double-digit productivity improvements over the next couple of years to counteract the growing cost strains.

When you consider where the Gold Fields mines are, vis-a-vis some of our competitors, while we don't have the engineered infrastructure that is conducive to very high levels of productivity other than at Beatrix, as we move into increasing newer areas, like some sorts of verticals, like Driefontein five-shaft, the ability to improve our levels of productivity will be a lot easier than some of the older areas of those mines.

So, I do think that there is opportunity over the next couple of years to have appreciable double-digit increase in productivity and in fact, Mike has committed his bonus on being able to achieve that. So, I'm quite sure that we're going to see some good performance going out.

Okay. I hope Mike agreed to that. Thanks a lot.

Again, ladies and gentlemen, if you do have any final questions or comments at this time, please press 1 followed by 4 on your touch tone phone.

Ladies and gentlemen, there appear to be no further questions at this time. I would like to turn the floor back to Mr. Jacobs and the management for any closing comments.

Dante, thank you very much indeed. Welt, ladies and gentlemen, thank you very much indeed for listening in. As you've heard, it's been a tough quarter but I think we've come through it well and we're certainly looking forward to the quarter ahead and we look forward to talking to you again in three months' time.

Thank you very much indeed and for those of you in North America, if you have any specific questions, please feel free to contact Cheryl Martin. Her e-mail address and telephone numbers are in the book, so, please feel free to contact her if you have any questions. Thank you and good evening.

Ladies and gentlemen, thank you very much for your participation. This does conclude today's Gold Fields Limited conference call. You may disconnect your lines at this time and have a wonderful weekend.