Gold Fields Ltd (GFI) 2005 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Gold Fields third quarter 2005 quarterly earnings results call. [Operator Instructions]. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Willie Jacobsz, Senior Vice President of investor relations. Please proceed, sir.

Thank you very much Coby. Ladies and gentlemen thank you for joining us today for this third quarter results presentation. We will start off with Ian Cockerill giving a brief overview. He will be followed by Nick Holland, as usual, talking about the finances. Mike Prinsloo will then give us a brief overview of the South African Operations and John Munro will talk to the international operations. After that, there will be time to questions and I'll hand over to Ian Cockerill. Ian?

Thanks very much indeed, and good afternoon everybody, and welcome to these results. Now, every so often in the life of CEO there comes a quarter when you can report results with a high degree of satisfaction and this is one such quarter. Despite the annual disruption of the Christmas break, the strong Rand and the hostile Homing Bid (ph) bid, the operational team of Gold Fields has delivered against our previously stated commitments, and it gives me a great sense of pride to be able to say that.

Once again, under extreme duress, the quality and the caliber of the Gold Fields team has shone through with improved output, and consistent cost control. In brief summary, we said last quarter that we would be increasing output at similar costs and it's very pleasing to be able to say that that is exactly what we can report on.

Gold output has increased four percent to 1.088 million ounces, with the South African operations dropping marginally by two percent to 711,000 ounces, and international operations increasing as planned to 377,000 ounces. Costs were held steady, expressed in South African rand terms, it's under 65,000 rands a kilogram. And with the rand strengthening by three percent quarter on quarter, against the dollar, the dollar per ounce cost was up fractionally to $340 per ounce. Pleasingly, the South African costs are very close to our interim goals of sub 70,000 rand a kilogram, and were in fact down one percent quarter on quarter.

The lower received rand per kilogram price met that despite the increased output we had a marginally lower operating profit which this quarter fell to $90 million, from the previous $104 million in the December quarter.

Net earnings were down, principally as a result in the drop in operating profit and changes in mark to market position of some of our currency instruments and Nick will talk about that in some more detail. However, net earnings excluding gains and losses on financial instruments rose from $16 million in December quarter, $21 million this quarter. Our cash position remains sound with just under $500 million of cash on the balance sheet, so I think all in all, a very satisfactory quarter with strong cash flow and with that let me hand you over to Nick who will give a little more detail on the financial. Nick, over to you.

Thank you. Good afternoon or good morning. With the transport production (ph) up four percent as you have just heard, and with the gold price received virtually unchanged, from the previous quarter at $428 per ounce, revenue for the quarter increased by $15 million to $495 million. We increased production as well as the strengthening of the rand from 6.12 rand in the previous quarter to 5.95 rand in the previous quarter led to an increase in costs from $382 million to $395 million.

Operating profit for the quarter was at $90 million, compared to a $104 million dollars in the December quarter. Net earnings for the quarter were $2.5 million, compared to $13 million in the previous quarter, with the main reason for the decline being the drop in the operating profits, as mentioned earlier, as well as a loss on financial instruments of $8 million, compared to a gain of $24 million in the previous quarter. The decline was due to a mark to market loss incurred on a South African interest rates swap. However the interest rates swap still have a very significant positive mark to market value of some $27 million and is generating positive cash flows of $5 million per quarter.

In fact, as we speak, the markets moved again in our favor and all of the mark to market loss that was reported in the March quarter results have since been restored, so in fact, if we did these results today we wouldn't be showing this decline.

Net earnings excluding gains and losses on financial instruments amounted to $21 million for the quarter, a 31% increase over the $16 million reported in the previous quarter. This increase of profits was facilitated by a tax rate reduction in Ghana which resulted in a once-off tax rebate of $11 million.

Costs were, again, well-controlled in the quarter with cash costs increasing by $10 an ounce or three percent to $340 an ounce and this was all due to the strengthening of the rand since in South African terms, cash costs were flat at 64,900 rand a kilogram.

Cost control initiatives at the South African operations in particular continue to gain pace during the quarter and the project 100 initiative which is aimed at saving over 100 million rand or around $17 million a year, on improved stores cost consumption has realized its targets for the year.

Project beyond, which is a procurement initiative targeting savings of up to 10 cents per annum on material services and capital expenditures in South Africa and on which around three billion rand a year, or $500 million a year is expended, is generating good benefits. This project is split into phases and the first phase of the project is in progress and savings of around 80 million rand a year or $13 million have thus far been realized.

The benefits of these projects, however, have not yet been solved in costs as there is a lag between putting the new contracts in place and realizing the benefits in terms of working costs as the new contracts are drawn down. It is expected that a significant benefit will accrue in the 2006 financial year, up to $20 million per annum, and we still expect to achieve the overall savings against our historical base of between 200 and 300 million rand a year, which is between 38 and $50 million a year. This should be achieved within the next 18 months.

This project can also be extended to the international operations and early indications are that we could save (ph) of $20 million a year in procurement costs at these operations, both in terms of specific cost reduction initiatives aimed specifically at these operations and arriving from the benefit of group procurement leverage across the grouping exercise.

Looking at our cash flow for the quarter we have very positive cash flow for the quarter of $106 million, that's up from the previous quarter's $40 million. Capital invested in our ore body was $75 million and some $20 million has also been expended on the acquisition of a significant interest of 9.8% in Curaplex (ph), a Canadian junior whose main asset is a majority interest in the Ameliodon (ph) project in Northern Canada. Ian will talk about that a little bit later.

Cash at the end of the quarter began at $474 million was similar to the previous quarter and despite the strong rand dollar exchange rate. Gold Field continues to have one of the strongest balance sheets in the industry. What I would like to do before moving on to the individual operations is go through some comparative analysis that we have done between how Gold Fields has performed against Harmony and I think this is topical given the hostile bid that has been out there for the last six month and to this end we put out on the Web site this morning an analysis that showed a comparison between Gold Fields and Harmony.

For those of you who have that with you, I will talk through it but for those of you who don't, I would try to explain some of the highlight figures in these six or seven slides. The first one looks at SA gold production. That's just gold production from the South African assets over the last seven quarters and it shows Harmony has declined substantially from the first quarter of 2004 they had around 27,000 tons of gold per year production in South Africa. That has now declined to 19 tons for the March quarter and with the continuing restructuring going on we expect that to decline further.

Gold Fields, by contrast, has in fact maintained and even increased its profile to 22.1 tons per quarter, so now over this quarter in South Africa alone we produced more than three tons of gold more than Harmony and we anticipate that in the coming quarter that we should at least maintain or improve upon this.

If we want to look at the cash costs with respect to the South African operations only, remember, this excludes the international operations of both parties which in Gold Fields case is quite significant and in the case of Harmony, fairly small. And again you've seen a widening of the cash costs. If you look at seven quarters ago, Harmony was trading around about 76,000 rand a kilogram, we were around about 74,000 rand a kilogram. This quarter now reported, despite significant inflationary cost pressures and above inflation wage increases, Gold Fields has in fact declined in terms of operating costs down to 71,000 rand a kilogram, that's cash costs, while Harmony has escalated up to 87,000 rand a kilogram.The gap, therefore, between the cost performances of the local assets of the two companies is an increase of 16,000 rand a kilogram. I think this demonstrates who would be more effective in cost control.

If you look at brew (ph) to production, in other words international and local production aggregated together, that began a huge gap with Gold Fields for the quarter having managed production of 36 tons of gold, Harmony only 21 tons of gold and you can see that's over 75% higher that Gold Fields produces than Harmony.

Again, bruda (ph) cash costs, the same is for the trend as we expained on the local access with bellport (ph) cash flow on the 65,000 rand a kilogram for the quarter and that contrasts with cash costs of Harmony of 86,000 rand a kilogram for the quarter and it's interesting to note that if you compare Gold Fields' cost performance to a year ago, in other words, compare it to the March 2004 quarter, our overall production has increased by five percent quarter on quarter, and our overall cash cost per kilogram has in fact declined and our total costs have been held constant.

At the skelaxin (ph) operations, you'll see the same issue. We've managed to increase our production by two percent compared to the previous quarter last year whereas we held cash costs basically the same. I think this is the indication of the success we are seeing in terms of the cost initiative that I mentioned earlier, the project 100, the project beyond and we are certainly seeing some of the benefits of the project 400, which Mike Prinsloo will talk about being a productivity and revenue driver on the local operations.

If we then move to cash flow comparative analysis, that's one of the slides we put out this morning, and what we thought we would do is show you how the operating cash flow of the two entities compares for the March quarter and then the notion (ph) of cash flow from operations after taking into account capital expenditure.

Gold Fields had operating cash flow in the March quarter of 653 million rand. Harmony had a cash outflow from the quarter of operations of 614 million rand. Gold Fields invested 440 million rand in its oilbuddies (ph) over the same period, in line with its strategy of creating long term assets for shareholders. Harmony, by contrasts, invested only a third of that, 156 million rand.

The total national (ph) cash flow from operations in Gold Fields was up 213 million rand, compared to a 770 million rand outflow from Harmony. They were not able to fund any of their capital expenditure from their current operations.

Gold Fields paid dividends of 147 million rand during the quarter. Harmony, by contrast, paid nothing to shareholders. Gold Fields invested 150 million rand last quarter in acquiring investments offshore with a view to growing the company in line with our strategy of adding a third (ph) of one and a half million ounces over a period of three years. Harmony, by contrast, liquidated investments to keep itself afloat.

Gold Fields invested 133 million rand in terms of a loan repayment on the umbrella financing arrangement which is clear demonstration of our commitment towards empowerment in this country.

Despite all of these cash outflows, Gold Fields managed to maintain its cash balance at the end of the quarter at the $500 million level that we mentioned earlier, where as, in fact, Harmony took their cash flow into an overdraft of over 250 million rand. I'll talk later about the relative balance sheet positions of both parties.

Before we look at the group (ph) performance, you will notice from Harmony results that they had posted what they call a cash operating loss for the quarter of 55 million rand. We in turn have reported an operating profit for the quarter of 537 million rand and an analyst who having looked at the numbers carefully may take the view that they are the comparable figure he should look at to compare the performance of the two entities. In fact, that is not the case.

Since Gold Fields arriving at an operating profit takes account of corporate marketing, new business and general admin, employment termination costs and restructuring, as well as rehabilitation cost provisions. And if you restate the Harmony results on a comparable basis to Gold Fields then in fact the cash operating loss for the quarter of 55 million rand was in fact a 286 million rand loss and that compares to an operating profit for Gold Fields of 537 million rand. That is a differential between the companies of over 800 million rand and one has to ask the question would any ratio be enticing toward the Gold Fields shareholders, never mind the cap of 1.51 that Harmony has put on any increased offer to Gold Fields shareholders.

Looking over the page, if we look at a comparison of the South African operating performance between the two companies, as I mentioned earlier, Gold Fields now has production in South Africa of 22.1 tons of gold as against 19 tons of gold from Harmony. It generated revenue of 1.8 billion rand from the quarter as against Harmony's revenue of 1.6 billion rand, but in producing our 22.1 tons of gold, Gold Fields has expended 1.571 billion rand as against Harmony's 1.6 billion rand to produce less gold. You have to ask yourself who is the more efficient in terms of managing operating costs? It certainly looks like Gold Fields.

Operating profit, again, comparison of the local operations, 166 million rand for Gold Fields as against a comparable figure for Harmony of 305 million rand. Again, that's a variance between the two companies of almost a half billion rand just in one quarter, if you analyze that for the year you are talking differentials of 2 billion rand or over $350 billion. These two companies clearly aren't in the same status.

Looking at the balance sheet, the last point I would like to make, Gold Fields has on its balance sheet around 3 billion rand of cash as we mentioned before. It has debt of 1.5 billion rand which is the obligations in terms of the embella (ph) empowerment deal and that's over another four years so it has net cash of 1.4 billion rand. As positive working capital of cash of 600 million rand and it also has other liquid investments of a billion rand.

I don't think you'll find another balance sheet in the industry that is as solvent as this. If you look at Harmony, as we mentioned earlier, they went into an overdraft of 250 million rand. The long and short term debt is another 3 billion rand. They have deferred financial liabilities of 450 million rand which is the losses on hedges that they closed out, alternatively mark to market losses on hedges that still exist so that gives net cash of 3.6 billion rand negative and in addition, we have a working capital deficit of 750 million rand. Now, our situation is clearly not discernible, particularly if you look at the interest paid for the quarter of 96 million rand. There is no interest cover in this company because there isn't any operating cash flow, and I think the question you have got to ask yourself is how long the company can continue to operate under these circumstances.

I think we'll leave you to come up with the answer. With that I will hand you over to Mike Prinsloo.

Thanks, Nick. Good morning everyone. As Ian mentioned, the South African upset of fitty (ph) quarter was up two percent from the corresponding quarter the previous year, however, compared to the December quarter, the algo (ph) was slightly down by two percent on the back of the Christmas break and the fire that we experienced at our number two shaft. Together the South African ops produced 711,000 ounces for the quarter at a type of cash cost of 374 dollars U.S. amounts.

Operating profits was 28 million U.S. and our capital programs were the long life programs we spent as planned 25.3 million U.S. That expectation over Christmas break, if you compare it to our competitors, it was well managed at all our operations, yield and mining mixes are stable and our focus is now on volume. The project 500, which includes project 400 and 100 plus that Nick referred to is delivering the results. We're speeding up a lot of those initiatives to insure continued improvement.

Our productivity initiatives are in place, and a lot of the de-bottlenecking initiatives that we have put in place over the last few quarters, are starting to show good results. We are long life shop (ph) projects so well on track.

Turning to joobintine, joobintine (ph) had a good quarter with gold production up two percent at 293,000 ounces at a total cash cost of 64,500 rand a kilogram or $337 U.S. announced, resulting in an operating profit of 22.3 million U.S.. Capital expenditure on number one and five shaft projects at joobintine (ph) was as planned at 6.2 million U.S.

Lepeta (ph) tougher (ph) quarter with a fire we experienced at number two shaft, the high vent section at number two was a two week fire. We managed to restore normality early in February but that didn't affect the gold production and gold was down six percent, to 8.2 tons or 265,000 ounces at a total cash cost of 73,900 rand a kilogram, or $386 U.S. an ounce. This resulted in an operating profit of 6.9 million U.S. and our capital programs there mainly spent on the number four shaft long last was 10.2 million U.S. as planned.

The icky (ph) were very successful slightly quarter where they achieved 3 million fertility field shifts, an excellent achievement. That's the first time a Gold Field's mine has reached this milestone. In terms of its gold production it was at full cost last quarter where they were down slightly two percent at gold production at 153,000 ounces at a total cash cause of 424 U.S. an ounce.

And that was mainly on the back of the cutbacks that we made at number two shaft where we cut out a lot of the margin on mining and now have moved ice crews across the floor shop complete, which will be mining at higher grinds then what they were mining before. So BETX (ph) has improved its position quarter on quarter which resulted in an operating loss of 1.3 million U.S. dollars an ounce. Capital outflow for the quarter at the number three and for shaft complexes 8.9 million U.S.

So in conclusion, our response remains the same. We are having success with all of our initiatives. More of the same, increase on quality and volumes, our productivity improvements and aggressive cost managements will continue by reinforcing all the project 500 principles and more specific focus being on the bottom line.

Issues that have affected the June quarter to date has been unpredicted strike, which we had in the first week of the quarter. We had a 1-day strike we managed to put an end to it against the union and get the employees back to work. That's behind us now.

The Easter block period was also affected in the April month.

But projections for the June quarter across the South African office is very similar to this quarter both in gold and costs.

And with that I'll turn it over to John.

Thank you and good afternoon, good morning again.

Just in terms of an overview on the international operations I'll focus on some of the details. With limited time I won't go into all the numbers on the ferrous mines. They are available in the corporate book on our web site.

The international group had another very strong performance in the March quarter and produced according to guidance, several gold productions on an attributable basis increased to 377,000 ounces from 322 in the previous quarter. And that's up almost from 25% from the first quarter of this financial year.

That increase is largely on the back of the expansion that St. Ives talked of.

Total track costs are slightly at $283 U.S. an ounce and that's only due to a significant increase in costs at Damang, which I'll talk about later. All the other mines were either flat or better than the previous quarter.

Operating profit from the international group was some $62 million U.S. and that reflects some 69% of Gold Fields' total operating profit.

Starting with our Damang operations and the Tarkwa line, Tarkwa had another excellent performance achieving a 10% increase in gold production but before costs in the previous quarter. And that's really on the back of the new more achieving full wear production in the period. And in fact during the quarter achieved some 11% of that design vantage at 390,000 tons per month.

The leaches continue to perform well evidenced by a smaller use of gold from the leach pads. Total cash costs of the quarter topped over from $226 U.S. an ounce. That's slightly higher than the guidance, which is said they're approaching $200. And that's really only due to increased stripping undertaking during the quarter.

The mining fleet continues to outperform and we're using this additional capacity for increasing our flexibility in the open fleet by the additional stripping. And currently we expense all stripping to operating costs or cash costs, which is why the total cash costs are slightly higher.

We're looking to maintain these sort of levels going forward.

Operating profit was some 6% higher than the previous period. That's $87 million U.S.

Moving across to the Damang mine in Ghana, gold production did decline there to some 54,000 ounces as primarily in the backlog. We expected lower grade from the mine operations with the completion of mining in the large Damang open pit, which had been a source of higher grade also pot with that short stoppage due to a failure of the gear box on the stagnate.

Intercross increased to some $346 U.S. an ounce and that's again on the back of the slightly old volumes and the primarily lower grades.

Just looking to the future, Damang is likely to maintain these sorts of levels for the coming year. You're all aware that Damang has had an exceptional run over the last 2 years and is termed to be one, probably one of our biggest acquisitions ever. It is a time of consolidation at Damang we'll be mining gold largely from the lower grade satellite pith as a filler between the time now and when we expect to bring the Damang cut back into production, which will be in excess of a year from now.

The Damang cut back is new cut back on the large open pit at Damang where we expect to get back in some of the higher grades that we've seen in the past, which have been a source of the significant profits that Damang had contributed to this Company in previous quarters.

Moving across to Australia, St. Ives' gold production was up 254,000 ounces versus 106 in the previous quarter. And that reflects the parallel operation of the new final and the old mold during the period of commissioning of the new plant.

During the March, at the end of the March month the old mill was shut down and the new mill now operating.

During the quarter there's been new mill achieved design plan up from 550 tons per hour. And we've all seen some difficulties associated with material handling in the plant, spillage, and leakages. The miller software is operating excellently and we foresee additional capacity in this mill going forward.

Costs at St. Ives decreased marginally to $451 Australian an ounce. And there's a list of issues that have driven those in the quarter that I've set out in the book. I won't go into those in any detail apart from pointing out that included in those are numbers of non-cash charges associated with the treatment of those medium and low-grade stock piles that was undertaken as part of the commissioning of the Le Formal (ph).

And if you look at the profits for the quarter, it spiked a significant increase in gold production was flat against the December quarter. And again that's due to the significant long press charges which I'll set out in some more detail when the details reveals itself on our web site.

In terms of outlook, St. Ives should maintain these sorts of gold production probably slightly declining although in the coming quarter we expect cleanup on the old plant to make up a bit of gold production for this coming future.

We do expect to continue to see significant improvements in costs to St. Ives with the new mill and with some continued improvements in the underground mining costs.

Finally at Agnew, Agnew had an absolutely superb quarter. Gold production was up to 53,000 ounces. Total cash costs down to $300 Australian an ounce. And that contributed to a 30% increase in operating profit from this mine. And that's despite a $25 Australian an ounce decline in price received there.

This continued to be an excellent performer for us and recent discoveries as to Agnew suggest that we continue to see this into the coming year at least.

Moving on to our development projects and I'll spend a bit of time on Arctic Platinum because we had quite a lot of detail in the quarterly release on this project.

We'd indicated as far back as the October quarter that we had taken some time out to investigate some of the external impacts on the projects associated with the significant increases in EBIT costs and to capital and operating costs as well as the effect of some lower grade that we had seen in the deposit.

During this quarter we have reached the conclusion that at this stage in this environment we will not be preceding with the large-scale development of Artic Platinum. And that refers to the 10 million ton per annum large opening present on flat concentrated operation that we had previously spoken about.

There are a number of factors that have driven this, the most significant being a significant increase in capital expenditure if the major pull large scale development. Previous estimates have put us just over $300 million U.S. This has increased to over $500 million U.S. That sounds like a ridiculous increase in our collection so I'll break it down for you briefly.

Of that $190 million U.S. increase only some $70 million was associated with design and scope changes. The other $120 million U.S. associated with pricing increases and significant appreciation in the euro.

This mine would have operated from a cap ex and operating cost point of view in the euro environment. And the result would be significantly affected by the strengthening of that currency.

So capital has increased significantly. We also see a sort of flat decline in grade as we completed our final evaluation of the oral body in this last quarter. And instead of achieving mine grades of an excessive 2 grams a ton 3PGE in gold, we now see something closer to 1.85 grams a ton on the large scale deposits.

For the combined with a significant refraction in south market where the smelting terms have moved substantially in favor of the smelters as will be evidenced by our profit TC in RC movement over the last 6 months.

And combined with a cautious near-term outlook in Palladian, we've decided recent environment is a long time to bring this large-scale project to production.

This should not be writ to mean we do not believe it will ever be brought to production at this scale. We think the timing is now wrong.

We are continuing some work at Artic Platinum looking at completing our exploration program there, which had been looking at the gold and some of the higher-grade structures we referred to previously. We are completing the premising and the land acquisitions. And we are evaluating a smaller scale, high margin starter project, which may be a way to get this project going in the near-term without compromising the real potential that we see there in the longer term.

We have indicated that we're also talking to a number of firms about the possible involvement in this project but that's in early stage at this point in time.

I think in terms of completing the Artic Platinum, it's important to emphasize that we do believe it's remained a significant asset for our Company. It's aimed at exploiting 3 of the most important nickels for the future, nickel, platinum, and Palladian. And it's a very significant discovery at some 12 million ounces of Palladian, platinum, gold, and ore from the very mining friendly orientated country. And we think this mine has the project has the potential to develop in the future. And I do not intend to immediately realize our investment therein.

We are looking at a number of options going forward and we'll keep you apprised of those as they emerge.

Time on Cerro Corona project in Peru, we continue to make good progress there on all fronts. The premising documents were actually submitted this week and we're now into the regulatory process. And should within the next 2 months have our first public hearing on this project.

More importantly, at the project level immediate relationships with the immediate communities continue to strengthen. And that's very important in terms of the Peruvian mining environment where communities really control access to the ground these days.

Finally, the ongoing work on the feasibility in terms of engineering remained on track for completion in June of this year. And we expect premising at this stage to be completed in October. And as a result an investment decision remains in this calendar year.

With that thank you and back to Ian.

Thank you very much, John. Now we could go over these both without the benefits of the mines from their cost savings initiatives.

However, what is pleasing is a way in which these cost saving projects that were first ventilated to the market early last year are clearly driven and in some cases even exceeding our own expectations.

As our confidence in a system and the process grows, there's no doubt that we'll be in a position to extract more value in the years ahead.

In short, the whole strategy of increased quality volume mining, allied to stricter cost control is certainly assisting Gold Fields in dealing with the current and continuing tough economic environment in which we find ourselves in.

Moving on to exploration, our work has been the world to the quiet quarter. We did increase our shipping reflects to 19.8% via the private placement that Nick mentioned earlier. And further this means that we will now have a very significant presence in the very large Malawian camp.

Now you may recall that this was one stage firmly in the WMC camp. And with all the people within Gold Fields now who have a very familiar with this project and we think that it's something that we would certainly like to be involved with.

And the money that we've put into that is certainly going to help advance the project. And we'll do that in conjunction with current flex.

As mentioned on a previous quarter, the big yarning project in Ghana was attractive and was done very nicely. We found where we believe now is unlikely to grow into a decent stand-alone Gold Fields size prospect. And as such, Gold Fields has actually sought buyers to purchase this asset.

And I'm pleased to say that the response has been extremely favorable and we'll be making an announcement on this matter in due course.

In addition, on the exploration of the development side, we've recently given the go ahead to commence with the African pre-feasibility study in Puquio facet. There was a clear 8 days. Certainly the initial indications remain positive for a favorable outcome of this study.

Finally, moving on to the Harmony bid. As we mentioned in the course of your call, next week is going to be a crucial week in the whole bid process. Both Harmony as well as Gold Fields will be making representation to the competition tribunal who will adjudicate on whether or not the proposed merger should be approved in terms of the South African Competition Act. And this hearing will take place between May 3 and May 6.

In addition, Gold Fields has launched a high court application citing both Harmony and the Securities Regulation Panel whereby Gold Fields claims that the Harmony offer to acquire all the Gold Fields shares and to merge the 2 companies did in fact lapse on December 18 last year and is incapable of revival.

Now the effects of the lapsing of this offer is that any acceptances by shareholders of the Harmony offer subsequent to December 18, 2004 have also simultaneously lapsed. And the offer is now a nullity. And this case will be heard next week as well.

However, legal cases notwithstanding, the current spin on the market stands at, I looked at the screen before coming online, at about 1.63 Harmony shares to 1 Gold Fields share. And that's against the current offer of 1.275 Harmony shares for 1 Gold Fields. Clearly the current bid is way underwater.

Harmony indicated at their recent quarterly presentation that they will not be going over a 1.5 one-time bid. So what does that mean with this process? Are they contemplating the fresh bids at this level? Who's going to benefit from that? Certainly not current long-term shareholders but obviously those who tendered in the early second offer would receive a cut up on their original submission making this already expensive rights issue to Harmony shareholders even more expensive and hugely dilutive.

I'm sure that's not something that a rational Harmony shareholder would find attractive.

In the mean time, Gold Fields shareholders clearly await the publication of an independently validated ores statement. And for the seventh quarter in a row, Harmony continues to post losses.

Indeed, Harmony's losses seem to be accelerating rather than reducing. And as you've already heard this afternoon, Gold Fields continued to make profits. But the scale of the Harmony losses means that any combination of the two companies to create the world's largest gold company actually is going to result in the creation of the world's largest loss making gold company.

Now, why would any sane Gold Fields shareholder want to give up their dividends and their growth prospects to enter into such an entity? Even if Harmony did increase their offer, all the Gold Fields shareholders would land upward is a larger percentage of ownership in the world's largest loss making gold company. Not an attractive prospect at all.

Well we believe that our shareholders have seen through this charade and hopefully this will be the last quarter that we need to talk about the bid and next quarter we can revert to applying all of our time to doing what we have traditionally done best.

We have a proud track record of making value adding deals and transactions. But once this bid is underway, we're constrained by Rule 19. And we're unable to do anything in terms of significant transactions.

So, we look forward to being relieved from this constraint once the bid is called off. And we've already identified several opportunities or potential opportunities, which we believe that we would like to pursue and certainly assist in achieving our objective with that additional 1.5 million ounces by the end of 2009.

And by doing that, what we will be doing is we'll be adding value to our shareholders and not making money for the banks and the lawyers.

With that, I would like to thank you and I will open the floor to questions.

Thank you, sir.

[OPERATOR INSTRUCTIONS]

Your first question comes from the line of Unidentified Audience Member.

Hi, good afternoon. It's actually Unidentified Audience Member.

A quick question just on the fees that you've incurred on the hostile budget. You've spent. You had to spend about $14 million a quarter. Now you're, this is obviously in defense of the bid so it's not a lock with Harmony where they have a sort of a guidance number in terms of the success fee. Can you give us a sense of what you think you'll need to spend assuming this process drags out through the next quarter?

Nick Holland here to answer that question.

I think the simple way to answer it is that it depends when the bid expires. If the bid expires pretty soon we'll be able to set on the table across from them and book them through the income statement. If it drags on for another 2 or 3 months, you know how expensive it is to use lawyers and see the counsel. And it'll be more expensive.

That's one of the reasons we haven't given a number yet.

So I'm assuming that the sort of $14 million a quarter is fees paid and incurred in that quarter? I guess that's what I'm getting at, is that ...

What it is it's fees incurred and paid in that quarter plus it's an apportionment of other costs over the whole period.

Now it's very difficult to apportion out costs when you're not sure what the period is. So we keep on redefining that denominator.

But it's the combination of those 2.

Thanks, Nick.

Yes.

[OPERATOR INSTRUCTIONS]

Your next question comes from the line of Heather Douglas with BMO Nesbitt Burns. Please go ahead.

Hi. I have a couple of quick questions.

But first can you tell us how you're license application is going in South Africa?

Heather, yes, they're going very well. I think we have had, we've been in constant contact with the department since last September. And it's been a bit of an interruptive process. We took the conscious decision not to submit but to have this interaction with the department so that when we get chance to submit we will really going to be submitting a very complete and reasonable document and something which the department wanted.

I think you need to understand that this is still a process in its infancy down here. As we stand now, we're very close to that final submission. In fact it's going to be weeks. And we will be submitting on behalf of all 3 of our operations so very, very close at this stage.

Can you give me an idea of how the DME is doing just overall in the sector? I know AngloGold hasn't received theirs. Harmony got some.

What about on the base metal side or some of the other metals? Are they able, are they turning out approvals?

They're certainly not turning out approvals. What's happening is people are putting in submissions and then there's quite a lot of questions which are referred back to the people submitting. And it was because we decided to have this constant situation (ph), if you like. We felt that was going to be a far more productive process. We'd like to submit a full and final document that has already been through several iterations with the DME. My understanding is that there have been one or two licenses which have been granted. But these are on much smaller one-time (ph) operations. But certainly, we're not aware of any large-scale license conversions that have taken place already.

Okay. Great. My second question is about the cutback at Damang. Can you give us a little bit more guidance about what the capital will be and what sort of conversion of resources to reserves that will occur?

We're not in a position to talk about capital and details beyond that. We aren't looking at any (inaudible) ounces (ph) from that cutback. But many in the Eastern world (inaudible) in the Western world is actually reiterated on the design because of the additional potential we've seen. You may recall we're (inaudible) talking to someone (inaudible). The grades (ph) would be typical of what we've seen out of the Damang previously, which in the 2-2.5 (inaudible). Just to comment on the timing, we only expect to have made an investment decision this cutback in this quarter and we would like to get the information (ph) convincing in the new financial year. But it will be at least a year away from here before we get anywhere near (inaudible) as you can appreciate, as well as the over burden that has to be removed.

Okay. And my last question, I may have missed it when you announced - what was the purchase price for Cerro Corona?

We haven't announced it yet. (inaudible) just as background, we only carry the previous (inaudible) because other negotiations associated with (inaudible) that aspect of the product is an improvement in onsite and, as a result, we have not done that and are still not in a position to do that.

Okay. So, at the time, I can't remember exactly when you said, when the feasibility investment decision, at that time, you'll also ...

That would be (ph) ...

That's when the purchase ...

(inaudible) sensitivity, so we'll definitely be a position to do that. We'll never be a secret forever.

Okay. Thank you.

Your next question comes from the line of George Lequime with RBC Capital Markets. Please proceed.

Hi. It's George Lequime . Another question for John. I think he's fielding a lot of questions today. John (inaudible), I wonder if you can expand a little bit what's going on there with the (inaudible). And it seems to me the underground tonnage is a little bit lower than where it should be. I'm just trying to get a sense of how much is coming out of the stockpile now and what's the size of the stockpile that you've got rest on surface (ph)?

Okay, George, just (inaudible) the reference in the text to some difficulties there. One of the things we documented is to achieve the design growth on the (inaudible), which is the (inaudible) is complete. We're achieving between 5-5.5 instead of 6-6.5 ton (ph). We (inaudible) is a lot more complex and different than what the - slightly different that what the feasibility has suggested. We also initiated back with the control on some of the mining and cost control. That's not coming in hand. In fact, in the last part of the (inaudible) the control of the operations includes (inaudible) now exceeding (inaudible).

In terms of underground kinds (ph), unless you show what your expectation would be, are we doing (ph) 140,000-160,000 tons a month from underground, which is probably the (inaudible) going forward. Junction is on a ramp-down. As we've indicated previously, it was very (inaudible). Mine was actually being in a (inaudible) mode or just (inaudible), which has been very successful, which is why the life has been extended. And (inaudible) will be reflected by increased tonnage out of the (inaudible). So, we will make sure to maintain around 140,000 ton a month level there.

Moving forward, now we're actually moving to only relying on new mining for (inaudible). They are limited amounts of stockpile there. (inaudible) only used as a supplement guess from the (inaudible) mine schedule.

So, it's open, but it's - you're pretty comfortable about keeping the volumes, getting the ...

(inaudible) we mine way in access of these kinds previously. You'll recall back in the previous financial year we did an extensive (inaudible) program. We can more than meet that (inaudible). We now are reaching around for a happy medium for what these underground mines and surface mines can support.

And the yield of (inaudible) should be about, what, 3.2, 3.3, somewhere around there?

On a blended basis, it's not that meaningful. The fee to the (inaudible) is about 3.5 to four grams a ton. As you see in the past, (inaudible) can be fairly variable on grade and that's just a (inaudible) which underground mines are contributing the bulk of tonnages. Also, the underground - I mean, the open pit mine can vary as you're aware with (inaudible) removal and spurred with oil mining, you can have a different blend of underground, which is why stockpiling (inaudible) positive ebbs and flows in the contribution from the (inaudible). At least, historically, you've seen fairly bit variations in (inaudible).

But in terms of sustainable long-term answers, which I'll get to the real question you're asking, we indicated that (inaudible) would be in the range of around 600,000 tons a year - sorry, 600,000 ounces a year and we expect to be very close to that and maybe flat (ph) in the coming quarter where we'll supplement that with (inaudible) grows from the oil well.

Thanks. And just as one last question, maybe to Ian or to Mike. Just with the (inaudible) coming up, what - can you say that it's a bit of scene with what is going on as far as (inaudible), sort of the timetable for the negotiations?

George, the negotiations traditionally start, usually just off to the - sometime in June, possibly going into July. Clearly, it doesn't (inaudible) already stating negotiate at that point. There are some absent interactions which have already taken place. I think there's been some press commentary which seems to have come out from the union itself. And one gets the sense this year, even the union is far more sensitive to the current state of the industry.

And I will certainly hope that this is a year where (inaudible) will prevail and we won't have excessively high wage increases. Let's be honest. This is not an industry that can afford a huge wage increase. In fact, some would argue you can't really afford a wage increase at all. And, but, certainly, it does appear to be a greater sense of understanding coming out from organized labor. So, this is not a 20% pay increase year. Not at all.

Thanks, Ian.

Your next question comes from the line of Russell Fryer with Deutsche Bank. Please proceed.

Good afternoon. Congratulations on a rather (inaudible) set of numbers. I don't know if mentioned (inaudible), but could you give us an update on how expiration is going there with (inaudible). And then, bibionic (ph) project, maybe, can you touch base on that have you any chats with (inaudible) with regards to (inaudible)? Thanks.

As I mentioned in the - in my summing up, Russell, Dibioni (ph) is in the for sale block. We've had quite a number of interest people who've put some bids in and we will be making an announcement on that at some stage into the future. But you can assume that we will be selling it.

As far as the (inaudible) is concerned, I also mentioned that we have given the go-ahead for the feasibility - sorry, the pre-feasibility study and that's going to kick off within the next month. And we hope to have results from that before the end of the calendar year. The expiration drilling that's continuing there is - still continues to extend the zones (ph) of mineralization, but we're stepping back a little bit in the short-term from just looking for more ore and we're starting to do more in-fill drilling to give us greater drill density so that we can increase the status of the reserves up to a higher level of confidence.

In fact, the follow-up program with the pre-feasibility is to drill off some of these areas to the 50 by 25 grid matrix. So, it's going extremely well and probably by the May month, Gold Fields will be vested as to 50% in this project. And we're very excited about being there. I think it has the potential to turn out to be a very exciting prospect for Gold Fields.

Thank you.

Sir, you have no questions at this time.

All right everybody, well, thank you very much indeed and thank you, everyone, for listening and certainly we look forward to reporting back again next quarter and talking about the future of Gold Fields. With that, thank you very much indeed and cheerio. Bye-bye.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.