Gold Fields Ltd (GFI) 2005 Q1 法說會逐字稿

Good day, ladies and gentlemen. Welcome to your Gold Fields Quarter 1 Results Conference Call. My name is Bernie, and I'll your coordinator, today. At this time, all participants are in a listen-only mode, and we will be conducting a question-and-answer session at the end of today's conference. If at any time during this call you require any assistance, please press *1 and a coordinator will be happy to assist you. As a reminder, this call is being recorded for replay purposes.

I'd now like to turn the presentation over to our host for today, Mr. Willie Jacobs.

Bernie, thank you very much. Ladies and gentlemen, thank you for joining us for this results conference call. The format that we will follow is that Ian Cockerill, our CEO will start off with a brief introduction. Nick Holland, the CFO, will take us through the numbers. Mike Prinsloo will then talk about the South African operations, and John Munro about the international operations. After, Nick Holland will come back and give us a brief comparative analysis of the Gold Field results, together with [inaudible]. Ian Cockerill will then stand up, and thereafter, we will take questions.

I hand it over to Ian Cockerill, now.

Willie, thank you very much indeed, and good morning everybody or good afternoon -- depending upon where you are in the world. And thank you for joining us, today.

I think before we go into the detail of this quarter's performance, let me just make a few general comments. I think our tax [inaudible] this quarter as being a very strong performance from Gold Fields -- particularly in our South African operations -- despite the very challenging economic environment that we find ourselves in, here.

Group operations profit for the quarter was $72 million. That's down marginally from the previous quarter in June, when we had $83 million. Net earnings of $16 million -- which is a big increase from last quarter's negative $25 million -- although that did include a write-down in that particular quarter. This also inflates through to an EPS of US$0.03 per share.

Production for the quarter was in line with the guidance that we gave in the June quarter, at 1.007 million ounces. Costs have been particularly well controlled, with total cash costs to the group up less than 1 percent in rand terms to 66,500 rands per kilogram. But due to the 5 percent strengthening of the rand over the quarter, that cost expressed in dollar terms were up fraction 4 percent to $325 per ounce.

Our revenue maximization and cost-reduction initiatives are certainly beginning to bear fruit. And they certainly contributed a long way in helping us to build and to support margins, as well as keep our costs under control. And that's despite some very big cost increases that we had to absorb in this past quarter. Predominantly, the 7 percent wage increase coming out of the [inaudible] settlement, as well s some fairly hefty fuel increases, as well.

We saw improved volumes from our South African operations -- tons milled from underground in South Africa is up 4 percent. And encouragingly, our key international capital projects in [inaudible] are on track. And John will talk to those, later.

Also, in Croatian Gold Fields International -- through the Iron-Gold transaction, it's thoroughly on track. A significant bounty has already been created for shareholders since that deal was announced.

We've also continued to invest in the future of Gold Fields, with over the past quarter, having spent $755 million rand of CapEx in projects at Kloof, Driefontein, Beatrix, Andrew and St. Ives. We're particularly proud of our cost control in South Africa -- where, as I said earlier, we've now maintained our unit cost-per-kilogram at around 73 rands per kilogram -- despite the cost increases I mentioned earlier. And that now has meant that we've kept our costs in rand-per-kilo terms effectively flat for the last five quarters.

Our goal, as previously stated, is to get that cost in South Africa down to 70,000 rands per kilogram by the end of the March quarter. We're going to do this by continuing with production buildup, as well as the cost initiatives -- some of which Nick will take us through a little bit later on.

We've done this being consistent with the grades that we've mined, and certainly well in line with our license-line grades. So all-in-all, I think it's been a good quarter for Gold Field, and let me hand you over to Nick to take you through the financials.

Thank you, Ian. Good morning. Our revenue for the quarter was down from $434 million in June to $425 in the September quarter. As Ian explained to you, that was mainly because of the 3 percent drop in production, which was planned. And that offset the fact that the dollar gold price went up from $395 an ounce to $400 per ounce.

Total costs went up $10 million -- from $357 million to $367 million. And that is all due to the rand -- which again strengthened in the quarter from 6.60 rand to 6.36 rand in the September quarter. Operating profit then for the quarter reduced from $83 million to $72 million, principally on the back of the planned reduction in production. Operating margins still healthy at 17 percent.

Profit-before-tax for the quarter, though, increased from $24 million to $33 million in the September quarter. And that was due to a market-to-market gain on a rand interest-rate swap that was taken out to converge interest, which was fixed on the Mvela loan to a floating rate of interest. And that's generated $23 million of value during the quarter. More importantly, that's also generating very good cash flow advantages for the group, as we take advantage of the short-term interest rates in South Africa compared to the long-term interest rates. And we have quite a thick yield, in that regard.

In net earnings then for the quarter, $16 million compared to a loss of $25 million previous quarter. And as Ian mentioned, that was largely due to an impairment we affected on Beatrix 4-shaft. If you strip that out, the headline earnings for the September quarter are also $16 million, compared then to headline earnings of $20 million in the June quarter.

Looking at cash flow for the quarter -- our cash flow from operations has declined from $66 million to $31 million. [inaudible] part of that, though, can be attributed to the lower operating profit. And we've had some working capital changes, given the fact that it was our fiscal-year end at the end of June. Typically, what happens is that the mines try and get all of their gold receipts in right at the end. And then typically, we have a buildup when we get into the new year. This is seasonal. Then also, there's a buy down of payables in the same period.

Also, we've been consciously building up stockpiles in Australia with the [inaudible] coming in. So there's been a time commitment/investment into inventories, in that regard. So this is nothing that concerns us. It was just hampering movements in working capital that were reversed in the short-term.

Last quarter we also paid the dividend of $40 million. And we've invested again a substantial amount in capital. Over $120 million was invested in the quarter. But that's down from $149 million last quarter -- which was an all-time high, for the group. And it's largely because of the need to try and accelerate the project in Ghana and Australia, given the fact that these excellent projects are going to provide a good double-digit return. They will enable us to increase our production [inaudible] substantially.

So we've made a key decision to try and accelerate these projects. That was deliberate. Next quarter, I think you'll see that coming up substantially. And that's the main reason for the cash outflow for the quarter of $124 million. I think if you normalize for all of these items, we would've been pretty close to flat for the quarter.

Nevertheless, the cash position of the group is still very strong. We went from $676 million of cash at the end of last quarter down to $524 million of cash at the end of this quarter. And that is a very strong position for the group. And this group is well-positioned with a stronger rand for a much longer period of time.

I just want to spend a couple of minutes telling you about some of the cost initiatives we're working on. Ian's told you that the objective for the South African operations is to get our costs down to around $70,000 rand a kilogram. I haven't converted that into dollars, but I'm sure you can.

And over this last quarter, the [inaudible] 6 months by about [70] percent. And the flow-through effects on our costs have been an increase of around 18 percent. Now, notwithstanding that, we've kept our costs flat at the South African operations, quarter-on-quarter. And that's due largely to a number of cost initiatives that are starting to bear fruit.

We have a project called Project 100, which focuses on achieving operational cost savings of around about $15 million per annum. [inaudible] enormous for production consumables, as well as engineering costs benchmarking. And over the period-to-date, since the project commenced -- that's from January through to now -- we have annualized savings of about $8 million per annum. So we're well on our way to achieving our [inaudible] in that regard.

In addition, we've established another project called Project Beyond, which is targeting savings on our supply-chain management -- and in particular, on procurement. And it's all about rationalizing and procurement activities, leveraging on Gold Fields' group buying power -- forming business reward-type relationships with suppliers. And we've targeted an annual savings of at least $45 million per annum, to be achieved over the next 24-36 months.

And interestingly to date, we've achieved savings already of about $5 million on paying for things like e-auctions on stuff like conveyor belting, [inaudible], grinding media, rooster port -- and without focusing on some of the other commodities -- to look at renegotiating our procurement strategy with these suppliers, and getting new contracts in place. And we expect to have [another wave starting to come in] for the balance of the year, such that I would be looking for us to have savings by the end of June of at least $10-11 million coming through.

In addition to that, other initiatives that we've identified are the improvements in maintenance systems, whereby if we can reduce the level of unplanned and [breakout] maintenance, we can certainly reduce our costs. We think there's around about $10 million there. Improving our controls over hospital accommodation, reducing IT costs, looking at implementing underground stores -- particularly at our [inaudible] operations. And improving our workshops and medical costs. There's a whole number of initiatives, here -- which will probably generate another $20 million or so -- probably over the next year.

So we're pretty excited about all of these opportunities. And as you see these benefits coming through, I think it's going to certainly improve Gold Fields' cost profile and its competitive edge compared to its peer group.

I think with that, I'm going to hand you over to Mike Prinsloo on the local operations.

Thanks, Nick. Good morning, ladies and gentlemen. South African Ops had a strong quarter, producing 700,000 ounces for the quarter, or 21.8 tons of gold. At capital cash costs of $73,000 rand a kilogram, or $358 an ounce -- resulting in an operating profit of 120 million rand or US$19 million. Capital spend was slightly down on the previous quarter, at 148 million rand or US$23 million, as capital was used for advertising in line with the 78,000 rand a kilogram budget.

The underground volumes were up 4 percent. And these are increasing on the back of Project 500, with the implement of [inaudible] have stabilized. There's still some work to be done at Beatrix. And Beatrix Number 4 Shop in the quarter, we had to cut back on production in preparation for the mining of zone 5 by upgrading all its systems and improving the check work for the higher volumes that will come out of the new Zone 5.

Shift to short-term goals. The mainstream sees volumes [rose] by pushing up productivity initiatives. And the main thoughts this quarter is to restore Beatrix back to 5 tons of gold a quarter. This increase should come from improved volumes and [inaudible] at 4 shop in the new Zone 5, together with a G shaft [folder] that is processing well.

Production in the December quarter is expected to increase. Byzantine should be flat, although because of less surface cleanup than is coming through this quarter, that should be positive on this sort of coal production. And so is Beatrix.

In terms of our Project 400, we've made a lot of progress during the quarter -- improving quality volumes. We're focusing on [inaudible] and sweeping [inaudible] as we've all seen nice improvements. Our concentration is on fragmentation and all the issues around the mined coal effect and the quality of mining -- especially at Beatrix. We've managed to move all the crews and stop all the marginal minings, so the mine is pretty stable.

And in a nice [inaudible], too, we've had over the last quarter is to get sort of rallying permissions on our Sunday working permissions for horizontal and vertical jamming, and [inaudible] permissions, which weren't possible in the past. So that's been a nice breakdown. So Project 400's well on check.

In terms of Project 400 rights -- different types minings [inaudible] onto its [inaudible] mine rights. And the flexibility should improve, in terms of managing this right as we go forth. Because in this quarter, toward the end of this quarter, we commissioned number 5 [inaudible] and [insulations] systems. That's been the project that's been running now for under 2 years. Once that's commissioned, we'll have a lot more flexibility to enable us to manage the grade a lot better at 5 -- easily should improve the grade at [inaudible] for it.

The [inaudible] profile at Kloof -- slightly below the [inaudible] mine grades published in circulars that we published recently. So there are some here due for improvement and [inaudible] 4 shop [inaudible] we should see these grades -- these 9.5 grams at [gunlevel].

Then, Beatrix. Beatrix is [dry] this quarter. It's been disappointing. As I said, we stopped Number 4 Shop. We did a mining of the high-grade areas in preparation for the new Zone 5. We had to do some work, there. And we should see those rising through in this quarter.

In terms of our capital projects, just to update you briefly -- even though Number 4 Shop for the program is unchecked, the 1, 3 and 5 shop -- vertical shop systems -- have another year left of capital. The mine spend there will be now on refrigeration and ventilation infrastructure. And development to have enough [inaudible] drop down net [inaudible] 67 line at 7 sharp. That development is well on check. And as you drew in the last month, Kloof's 4 shop is vertical shop. Production buildup is producing well. Several [inaudible]. The Beatrix Number 3 shops. So all the big capital programs are well on track, and they need to deliver.

In terms of the longer-term investment on the drop-downs. We've completed feasibilities on the [inaudible] drop-down and the growth-exchange [inaudible] drop-down. We've also completed the [inaudible] ability on the third [PBA] area. These projects show 85 and 95,000 rand per kilogram. And we are currently dusting off these feasibilities and positioning ourselves to be ready if we see any weakening in currency, and uplift in the gold process. We will take it [inaudible] to start these programs.

With that, I'll hand it over to John.

Thank you. Good morning. For an International Operations perspective, it was up another good quarter, with the operations generally performing according to plan. Despite this, gold-production dropped to some 307,000 ounces for the quarter. That's off the 343,000 ounces produced in the June quarter.

The biggest contributor to that drop in gold production was the termination of toll treatment at the St. Ive's mine in Australia. And just to give you a sense of why we did that, toll treatment as well as the [inaudible] through the toll mode processed between 12 and 15 Australian dollars a ton -- extra time to take. And with our new mode, it should it be available by the end of this calendar year, it makes no sense to continue that toll treatment. So we terminated that at the end of June.

Importantly, we've kept the mining rates at previous levels. We mined some 1.75 million tons, when we opened certain undergrounds in St. Ives, and only treated some 1.35 million tons. Clearly, the balance being stockpiled ahead of the new mill, as we do anticipate a period in the first quarter or in the March quarter where the old mill and the new mill will be running parallel, resulting in a stockpile.

Moving across to the Agnew mine in Australia -- gold production declined some 7,000 ounces there, to 42,000 ounces for the September quarter. And this is again on the back of an expected decline of the Crusader/Deliverer underground mine. We've in fact been expecting this mine to really reach the end of its life quite some time, and it's held on really longer than we had anticipated.

Importantly, activity at Agnew this quarter focused on developing alternative ore sources. And during the period, we approved the development of the Main Lode underground mine, which will be adjacent to the Kim underground mine, which is the main source of profit for Agnew, at the moment. Importantly, we also commenced the pre-stripping of the Songvang open pit, which is going to be a very important source of ore, going into the future. So we go through the [inaudible] online at Agnew.

At Damang, gold production declined 8,000 ounces on a centrifugal basis. And that's again on the expected decline in the reserves available. [inaudible]. We previously indicated that they have an extensive drilling program underway, testing the last contact in the eastern wall of the Damang pit, and we expect to bring that to account in due course.

Finally, on Tarkwa. Gold production there was slightly disappointing, earning some 2 percent -- up on the previous quarter at 125,000 ounces. That's really on the back of a very large accumulation of gold and on the [inaudible] some 13,000 ounces. The reasons for this offset are detailed in the detailed [current] sheet that's available on our website. But probably more important than even the gold production -- the mining and stacking operations performed very well during the September quarter. And we expect some 137,000 ounces onto the leach pad. That higher rate of gold production is now starting to show up. In the October month, we saw some stronger gold production. So we're not totally concerned about the performance of the leach pad. We have seen these ebbs and flows in gold production over previous years.

All right, then moving on to total cash costs. Attributable for the international group was some US$262 -- that's $6 an ounce higher than the June quarter. That's largely on the back of the declining volumes at Damang and Agnew, more than anything else. It's worth commenting on top with costs for this quarter. They were slightly down on the previous period. But not as much as one would've anticipated on the back of the conversions other than mining.

My [inaudible] points out that as we had expected, we continue to operate the contract fleet for the duration of the September quarter. And then obviously [bought] considerable additional cuts. As a result, we haven't seen a significant drop in the inner costs, yet. We do expect to see the signs happening in the December quarter. We have now terminated all contracted mining operations and started realizing undermining fleet. I'll talk a bit more about this further on.

Other than that -- across the group -- unit cost control remains excellent. On the back of the [inaudible] the gold production [inaudible] high again in costs. Operating profits declined from 10 percent to some US$53 million for the international portfolio.

Finally, in terms of outlook -- For the December quarter, results will be driven largely by performance of the Tarkwa mine. We expect the leach pad to perform slightly better than in the September quarter. But more importantly, we'll start to see a kick in gold production as the new mill starts to operate. We have commissioned [inaudible] and we do expect to see the benefits to earnings in the December quarter.

The other two small operations will be fairly stable. And we surmise that St. Ives, we'll be stable quarter-on-quarter. We only expect to see the benefits of the mill expansion or the new mill construction there in half of the '05 financials.

Moving on to the international development projects very briefly, in fact, because we had our leadership in discussing this conference call. There is a detailed content [inaudible] on all the development -- both Green Field and Brown Field projects -- in our book, which is available on our website. So really, to pick up the highlights...

The St. Ives construction of the new mill is on-plan in terms of time to be commissioned during the December quarter, and on-budget, which was $125 Australian dollars. So that project's performing very well.

But really, at the end, I'd like to just make a few comments on the top expansion project. Certainly the most exciting thing happening in the international portfolio at the moment. The undermining conversion commenced at the start of the September quarter. And the whole fleet is performing excellently. The volumes we planned and the efficiencies are in site design at the moment. So we really have got the whole fleet up and running, and are now into optimization phase. That project came on inside of the US$74 million budget.

Importantly, the construction of the new mill was largely completed in the September month, and we produced [inaudible] into that mill at the end of the September quarter. By the end of the October month, the mill was running on a sustained basis. The grind wheels inside design parameters as we're attaining values.

And you can take during the beginning of this week, we produced the first gold from that plant. Clearly, gold lockup in that plant will be considerable. So we can [inaudible] from [inaudible] gold. But the mill is really now up and running as far as we're concerned, and we should see two good months of contribution from that mill in the December quarter. So really, in summary, the Tarkwa expansion project has been a superb success, and really a tribute to the team, on that operation.

With that, back to you. I'm giving it back to Nick to talk a bit about the comparisons.

Thanks, John. The [inaudible] -- if you don't have them in front of you -- I'm going to try to talk you through this. One of the things that's been concerning us for some time is the comparability of financial reporting, in terms of the quarterlies. And in particular, Gold Field's against Harmony. Frankly, this was something that we wanted to get out in the open, anyway -- notwithstanding the fact that this offer has come along.

I want to break this up into two phases. First of all, look at the financial year-end just ended in June quarter both Gold Fields and Harmony. And then look at the first quarter through September. Now, the one thing that's [inaudible] and disparaging between the two companies is that Harmony produces what they call a "cash operating profit line" in their income statement. And then they have various other line items below that. And then there are their net earnings.

We, however, don't produce that. And we show what we call an, "operating profit line," which in fact includes some of the expenditures that Harmony includes below their circled cash operating profit line.

Now, if you look at the financial year ended 30 June, then Gold Fields made operating profit of 2.3 billion rand, and Harmony published a cash operating profit of 580 million rand. However, if you want to get a comparable figure to compare to Gold Fields' 2.3 billion rand operating profit, you need to deduct from the 580 million rand their corporate costs -- which were 98 million rand for the year -- their employee termination and restructuring costs -- which were 224 million rand for the year -- 86 million rand of marketing and new business costs. And there was an add-back of 26 million rand on reimplementation.

Now, all of those have to be deducted from that, if you want to compare that to the Gold Fields' figure. Because we deduct all of those items in arriving at our operating profit of $2.3 billion rand. So now if you make all of those adjustments, in fact, the operating profit of Harmony on a like-for-like basis with Gold Fields as of the last year is 198 million rands, compared to the 2.3 billion rands. A significant difference.

Based on the information that is on the Harmony Annual Report, and in the quarterlies, we've done our best to try and produce these figures on a like-for-like basis. And we have to make one of two assumptions here. So there may be some small inaccuracies in the figures, but we think by-and-large, they're a reasonable reflection.

If you didn't look at the September quarter just ended, Gold Field produced an operating profit of 475 million rand, whereas in fact Harmony produced a cash operating profit -- again at 133 million rand. Now, if you deduct the same items to get a comfortable operating profit for Harmony against the way it's been devised for Gold Fields, then you need to deduct 38 million rands of corporate marketing and new business costs, 154 million rands of restructuring costs -- and that also include employee terminations. And a third -- 14 million rands in reimplementation costs.

And if you do that, the 133 million rands cash operating profit then turns into a 73 million rands operating loss. And that compares to the 456 million rands that Gold Field has generated during the quarter.

Now you may well argue that some of the employee termination and restructuring costs that Harmony has incurred over the last two quarters are unusual. What we have heard, though, is that there is more restructuring cost to come over the next quarter. And certainly, these kinds of costs have become part of the ongoing business environment of a South African gold company. Hence, the reason was we just absorbed these costs into our normal operating costs.

Now, if you split out just the [inaudible] operations, let's look at that for the quarter and for the year. Then what you'll find is that on a like-for-like basis, if you restate the Harmony results on the same basis I've told you now, for the [inaudible] in operations, then for last year for the fiscal year ending 30 June, Gold Field's operating profit was 788 million rands, whereas Harmony's operating profit from its South African operations was 169 million rands.

Now if you go to the quarter just ended, the cash operating profit that was published by Harmony for its South African operations was 94 million rands. But again, you've got to deduct all of the items I referred to earlier. I'll assume then all of those adjustments -- it may well be that we're being a little harsh here in allocating all of these costs of South African operations.

Nonetheless, if you do it on that basis, the cash operating profit of 94 million rands turns into an operating loss of 112 million rands, compared to an operating profit that Gold Field has generated from its South African operations of 120 million rands. That's a very substantial adjustment.

The other thing to bear in mind is that the price achieved by Harmony over this period -- the first quarter ended September -- in fact was around 83,000 rand a kilogram, compared to the price achieved by Gold Fields of just under 82,000 rand a kilogram. So really, that's the base -- the differential between the two companies.

The other thing is that if you look at our cash operating costs on the same basis as Harmony... In other words, if you add back our employee termination costs, which were 16 million rands for the quarter... Then our cash operating costs for the first quarter were 72,500 rand a kilogram. That compares to Harmony's cash operating costs of 79,000 rands a kilogram for the September quarter. So that's our attempt to try to reconcile the results of the two companies on a like-for-like basis. And as you can see, there's clearly substantial disparity between the two entities.

The other point I'd like to bring up is to also compare the balance sheet performance between the two entities. Whereas Gold Fields has cash -- a little bit -- of 2.5 million rands -- a very solid position, Harmony has some 2 million rands of bad debt. So that's also being reflected on like-for-like basis.

With that, I'm going to hand it back to Ian.

[inaudible]. I'd just like to conclude with two major areas. Just an overview, again, of our object column on the... Now, this [pull down] strategy to improve the sustainable performance, particularly in our South African mines... We have said we repositioned the company to cope with the stronger rand environment. Remember, we can save some time with a rand that's likely to remain stronger for longer. We positioned the Company over the past year to deal with that.

I think that the Company is today benefiting from that strategy that was put in place about -- I'm talking particularly this quarter last year. We're certainly now at a point where we can quite demonstratively show the sustainable quality volume increases. We're seeing evidence of this, already. And we've heard from Mike that there's really more to come from South Africa.

We're growing our revenue line in tandem with a significant cost savings we're already seeing from our initiatives. Particularly on the procurement side in South Africa, as well as globally. Also, initiatives are in shared services and benchmarking of our costs. In short, best-practices throughout the group. These are helping us to chip away at our costs, without impairing the long-term sustainability of this group. Frankly, I think we'll see improved output from South Africa. And certainly improved output from the international operations as the two new mill projects come inline.

We have a fairly significant authorized expenditure level for capital investments. Certainly, in South Africa, that certainly will pave the way to enable us to open up the potential drop-down below infrastructure projects, both at Kloof and at Driefontein.

Internationally, once we've reduced production on a planned basis at St. Ives to reflect the stockpiling there, a new mill is going to commence operations in December. And that's certainly going to lead to a pleasing increase upwards in the March quarter.

The new mill in Ghana is now up and running and producing gold. And I have to say that the switch to the owner-operating regime is going incredibly well. And certainly, availabilities are exceeding our expectation, even at this early stage. Also, our international pipeline is strong. And we've made good progress on those dealings, as well.

Now moving on to the Harmony bit. I think at this point it's appropriate to say that because Harmony has actually posted their [authored] document in the US, we are under a high degree of legal restriction as to what we can say, until such time as we launch the same document. And that document will be published on or before the 3rd of November.

I want this new file. Obviously, we'll be going on the road. We'll be explaining our case. And we will certainly be more than willing to deal with any queries that any of you may have. However, the legal restriction doesn't conflict with our fiduciary responsibility. It acts in the interest of all our shareholders -- which is why we've taken legal advice -- on the integrity of the Harmony offer. And particularly, the [inaudible] approach.

The legal advice that we've received told us that they have exposed several flaws in the offer, which we were obliged in the interest of good corporate governance, to pursue. And hence, that's why we've been announcing these legal challenges.

They're not frustration. They're not resigned to stop people from voting. They're designed to level the playing field, and to make sure that all of our shareholders will actually be able to exercise their right to vote, and that the majority of shareholders are not disenfranchised because of the [inaudible]

Finally, looking at these results, I think it's fair to say that Gold Fields offers a high-quality, well-run South African platform, with excellent gearing and optionality to the rand price of gold, and now at the multiple-plant record, a very good cost control.

We also have a successful international portfolio, with a low-risk, fully funded growth pipeline. And also, a robust financial position -- matched with these high-quality assets, it enables us to weather the challenging environment such as we're now in, and enabling us to do even better when the conditions improve. Finally, this is a Company that's in great shape, and we're confident that there's a lot more to come.

And with that, let me hand you over to Bernie for the questions. Thank you.

[Thomas Neneymer], Lehman Brothers.

Quick question on the last point, really. Where you say you've taken legal advice on the shortcut. [inaudible] Harmony in the early [inaudible] offer. Could you level it a bit on where you see the legal flaws in the offer?

Actually, I probably won't give you too much detail. Obviously this has to be [inaudible]. This should have been a notifiable transaction -- that is the early settlement offer. In this, we believe it breaches the threshold and certainly creates the position of material influence over the affairs of the company. So in our view, that should've received the prior notification of the competition authorities. That is the main basis of our argument.

But they got pre-approval from the SRP, though. Right?

That's got nothing to do with it. That's a different body. The SRP can approve certain offers to be made. The competition authorities have to approve transactions, to make sure they comply with the competition. It's two different [inaudible] bodies.

[inaudible] of Cargo Investment Services.

Can you please confirm the record dates for the USADRs? And if you have one for the South African shares, regarding your own EGMs for Gold Fields. The Gold Fields Iron-Gold transaction?

The actual dates for the ADRs has already been set down as the 29th of October. This is normal practice. In fact, you would expect that we would've at least heard up to this date. We haven't decided yet when the meeting date is going to be. We've said previously that it was going to be no later than December 7th, and that's going to be decided. The record date for South Africa is supposed to be decided, as well. You do not require the same sort of lead time in South Africa for record dates. It's a much simpler process, here.

Before a few days ago, most shareholders of Gold Fields were assuming that the EGM was on the 7th of December. So clearly, in the current situation, the idea of moving it forward has certain advantages, in regards to the Harmony offer. I was just wondering -- for yourself, anyway -- I was just wondering whether you have consulted your own shareholders where they're moving the dates forward -- they would be heavy with that. And how do you equate that that would not be a frustrating act?

First of all, let's get the record straight. We never said the meeting was going to be on the 7th of December. What we said in our announcement when we announced the transaction is that it would not be later than the 7th of December. We never actually announced a meeting date. So those are the facts. We haven't yet announced a date. We said it'd be no later than the 7th of December. So the whole question of some straining action I think is academic.

Jim Copeland, Goldman Sachs.

There was some talk recently from [Kerber Menual] about the relaxation of exchange controls in South Africa, in terms of having more capital to go offshore from South Africa. Is there any suggestion that you might be able to have some of the restrictions in relation to the ongoing transitions relaxed accordingly?

Jim, this is Ian. You may have noticed that we've been quite busy throughout these last few days. And consequently, we haven't really had much of an opportunity to really be full text to them, other than to say, I think... Our view is that anything or any positive move towards government's previously-stated intent, or their [inaudible] relaxation of exchange control, clearly has to be welcomed.

But at this stage, we never had a chance to fully digest what was in his presentation. Once we have a chance to do that, then we'll be able to take a view. But at this stage, it's too early for us to give you a statement on that, or a comment on it. Sorry.

May we have the next question, please?

Heather Douglas, BMO Nesbitt Burns.

For a change of pace -- This "vast-reserve of ore" statement that came out didn't really show a significant increase that [inaudible] early in the operations in reserves. Can you tell us why not? I guess I've had expectations that there wouldn't be an increase [inaudible]. I wouldn't expect any [inaudible]. And whether or not -- and where those increases would occur -- or is the greatest potential.

I think the pretty most significant point to make is that expiration is a long lead time exercise, and that you don't tend to have consistent results. So we tend to see leads and lags. And the way we look at it is actually looking at expiration success for the longer periods. Because we tend not to identify if we don't improve a target in a 1-year timeline.

In fact, if you look at the last 2 years -- which is the period of enreignment -- it's the total expiration program for -- on a consistent strategy. We've improved that, by I think 2 million ounces with some standards. Some AUS$60 million, giving a discovery cost of $30 an ounce -- which is very much inside the historic discovery rates for that spot.

So I think it is a question of leads-and-lags. And not in getting things in, in time for the results run in June. It's not that easy. So we don't have any concern. I think the important thing to note is that we not only replaced the reserves that we've consumed during the year -- we increased them by some 150-200,000 ounces for that period.

In terms of looking forward, the expiration spend is spread between a number of areas. We still have the bulk of it on, in fact, expanding existing complexes. That's the ARGO contracts in the start -- which is the underground complex. The underground Leviathan contracts. And then currently expanding the [inaudible] of things on the lake.

And I would say that our probability of continuing to make discoveries and grow incrementally remains very high with the lead [inaudible] complexes are open in a number of directions. We don't have at this point the moving on to Brown Fields' planned expiration. Targeting areas like Neptune and the Greater Intrepid Area. Which our contracts are only really planning to open up, now. But if you look at them in proximity to the other large [inaudible] complexes, we think that they have long-term potential.

In theory, we have a little bit of [inaudible] spend -- targeting Green Fields' area. So we don't -- on this side, you can't base on individual targets. And you can see it's a very structured strategy to keep a number of targets moving forward simultaneously.

Our strategy is aimed at replacing reserves and then increasing the reserve life by 200-500,000 ounces per year. But we can't base on that happening exactly as per plan on a short-interval basis.

What was the second target at Brown Fields? There's Neptune and what was the other?

The Greater Intrepid Area. That's to the north and to the northeast of the Revenge complex. We're really just moving north on the lake.

Then my second question has to do with Arctic Platinum. It sounds like there were some disappointments. When we had the Open Day in May, I'd hoped for some greater picks from closer drill spacing, and that hasn't come through in your commentary. Today's quarterly sounds like the project may actually -- there may be a setback and it's slowed a bit. Can you give us more details?

I think it's really a question of timing. I know we've taken a step back. You can see from the resource numbers that we haven't had a material change in the resource grade, and we're clearly definitely impacting all of that on the project. But I think what's more important is actually taking some time to assess why we haven't seen a grade uplift. Our geologists in preparing that model and collating integration information, were convinced that we should've seen it. And we were obviously obsessing -- is it real, or is it not going to show up? So that's one of the reasons why we're taking what's basically described in the book as a time-out, to reassess that -- look at the entire project. We wouldn't regard it a setback at this stage.

But there are a number of competing dynamics, and the best way to describe this project is one with a very large number of moving parts. If you look at the internal drivers -- 4 major metals -- a number of currencies driving both capital and operating costs -- and then obviously external drivers, in terms of the custom treatment, which is the most-likely [inaudible] treatment option.

It's really a question of taking time out to assess the alignment of those various moving parts. And then making sure when we move into the final stage of feasibility we're on the right option.

May we have the next question, please?

[Russell Pryor]. Please proceed, sir.

Could you give us an update on Cerro Corona and what's going on with the [inaudible] district, and certainly on the ground level? What communities are thinking with regards to the project?

Maybe just some background enough to make some [inaudible]. During the quarter, there was a quite considerable interest in the custom market district, which is the district in which the Cerro Corona] project is located. But the end risk was not directed at our project, at all. It related to another large project in the area -- in particular, an expansion of that mine. And in particular, directly it concerned about water quality and the effects of mining.

However, the effects of that -- those protests to blockade roads -- restricted our access to the site. So we lost the entire [inaudible]. But there's a more significant impact in that there's a very heightened awareness around mining, concerning communities about the effects of mining. That has meant that the community consultations will have to be more intensive than they would normally have been.

We've also seen a rigid edge improve that is clearly now a lot more wary about the processes of [inaudible] and making sure they're absolutely bullet-proof. And we think that's prudent, as well. So the incident has led to a great tension around projects. But it looks to be an opportunity for us, very interestingly, to deepen the level of community interaction that we are actually having at the moment. We had been running a price that was [inaudible]. But there was an opportunity to in fact deepen those profits, potentially. And we think that that's been very good for the project.

But in terms of the impact on Corona, [inaudible] in terms. It [inaudible] timing one. We have had about a 2-3 month setback in the completion and submission of the [Burlington] documents. We had targeted beginning October for that. And it looks like we'll only hit middle December, now. That's primarily because we've taken the decision along with advice from the regulators to broaden the scope of the environmental impact study, and broaden the scope of our community interactions. That's the beauty -- making sure that those studies and the interactions that come with them and the result of the permitting process will be the solid foundation on which this project will survive in the 10-15 year life that it's likely to have.

So we think it's prudent things to do. Recognize the process of winning the license to operate is another quick one. And we think we can ameliorate the effect of this on the overall timeline and still expect to complete permitting by the middle of Calendar 2005 -- and hopefully catch the dry season, then. So we really are ready to take [inaudible] close to the [inaudible] that country.

Are you committed? Is Gold Fields committed 100 percent to this project? Or would you possibly have a strategic review?

No, we're absolutely committed to this project. We believe it's about the attraction to the project itself. We've indicated previously that's the opportunity to get a switch hold in Peru. It's very important for us. And we'll execute that strategy. The only question of commitment I guess relates to some of the wording that's being used in relation to this transaction. We have indicated that it is subject to the performance of some [inaudible] conditions. Those conditions are in our favor, in fact. And the most significant being we don't pay the [inaudible] consideration before the project is permitted from [HTS]. So that's not meant to be an escape clause. It's a prudent deal structure that works in our favor, that we've sort of -- it's a right place to be. It's the right project, and we can deliver it.

May we have the next question please?

[Thomas Neneymer], Lehman Brothers.

A quick follow-up on the earlier question. You said there are separate bodies. I fully appreciate that. However, the [SFP] has approved [of some] action, knowing that there's a 35 percent threshold, where you need to notify the Competition Commission. Now, what are the grounds on taking it to the Competition Commission?

As I already explained to you, we believe that this is a [inaudible] transaction, since certain thresholds are laid down. These thresholds have been breached. And certainly, we...

Only the threshold of the 35 percent, because of the [inaudible]?

No. There are certain thresholds in the Competition Act which have been breached. And as far as we're concerned, that requires this transaction to be reviewed. And secondly, we believe that the presence of 34.9 percent is a mytherial influence in terms of its holding. Particularly if you look at the general turnout at shareholder meetings. The general turnout at shareholder meetings in South Africa over the last 20 years are on the order of around 70 percent -- 65-70 percent. But 34.9 percent in itself gives you [data factor] control.

Now, our view is you can't deliver control of this company unless the Competition Commission has [inaudible] on it.

Wouldn't that be reflected in the takeover code? I mean the 35 percent is reflected. I would assume that's in the [inaudible / crossing]

That's got nothing to do with the fact they're [inaudible]. This is a Competition Act requirement.

Next question, please.

Lee Dunlap, Cargo Investment Services.

I just wanted to ask a question regarding have you talked to your own shareholders about the dates of your Harmony -- I'm sorry -- the Gold Fields' Iron-Gold [EGM]? And whether you had any feedback in regards to that.

Lee, we haven't spoken to any of our shareholders, as yet. I think as Nick actually said, we said in our previous discussions that the final date for that shareholder meeting will be on the 7th of December. That's the latest date that we can have it. And we've certainly not made the final decision as to when that meeting will take place.

And on the odd chance when you have the conference call in comfortable stages, bringing the vote forward would be tough. Not impossible, but it would be tough. Do you still hold the view that it would be tough?

That's exactly right. I said that on that day, and I stand by that. [inaudible] this afternoon.

Can we have the next question please?

There are no further questions at this time, sir.

Ladies and gentlemen, thank you all very much indeed, for listening in. It's been a pleasure talking to you. I look forward to the next quarter, where we can actually talk about even better results. And with that, thank you all very much, indeed, and good day.