Gold Fields Ltd (GFI) 2007 Q3 法說會逐字稿

Good day, ladies and gentlemen, we thank you for your patience and welcome to the Gold Fields Third Quarter Fiscal 2007 Results Conference Call. My name is Bill and I will be your conference coordinator for today. At this time all participants are in a listen-only mode. However, we will be conducting a question-and answer-session towards the end of today's conference. [OPERATOR INSTRUCTION].

As a reminder today's conference is been recorded for replay purposes. I would now like to turn the call over to your host for today's presentation Ms. Nerina Bodasing, Head of Investor Relations. Please proceed ma'am.

Good afternoon and welcome everyone to this Gold Fields third quarter F 2007 results. Ian Cockerill will kick-off today's call with the brief introduction followed by Nick Holland on the financials. Terence Goodlace will then go through the South African operational performance and Glenn Baldwin will then go through the International operational performance. John Munro will give you an update on Cerro Corona and Essakane and Ian will then wrap up. I now hand over to Ian.

Thanks very much, Nerina. And welcome everyone here this afternoon. First and foremost you may have heard the new name mentioned by Nerina that was Glenn Baldwin. Glenn is the newly appointed Executive Vice President of International Operation. Glenn has been with us since the beginning of the month. He has taken over the international portfolio from Terence. Who you remember or you recall with the untimely death of Brendan Walker, we asked Terence to move into the local operations and then we had to recruit externally and Glenn has joined us. We are very pleased to have him and we look forward to his contribution to the Company into the future.

Moving on to the quarter itself, traditionally reporting only the third quarter in Gold Fields is always a challenging one certainly for the South African Gold Mines. As it covers the Christmas holiday period and I think it is fair to say that this quarter has been no different.

Sadly attributable production decreased by 3% to 989,000 ounces and that was on the back of all of our operations with the notable exception of [inaudible] showing a drop in production due to combination of lower grades and or volume put through the mill as well as the traditional flow start up post the Christmas break here in South Africa. While it was previously indicated at the last quarter's guidance Choco 10 was well off the pace due to the water shortages that you had experienced in Venezuela. However despite the lower production, revenue increased 3% to $693 million as a result of a further 5% improvement in the price of gold that we received.

Moving onto the group operating costs. The group operating costs continued to be well controlled with a 6% increase in total cash costs expended and that increase was due to the inclusion of South Deep for a full quarter when compared to only one month in the previous quarter. There are also one or two, one off increases at some of the mines that are not likely to be repeated, but all in all, the actual cash expenditure on costs was reasonably well controlled. However, as a result of the drop in production on the units total cash cost basis across -- have actually increased to $399 per ounce as of today, that's largely on the back of the lower production rate.

Operating profit for the group was also down to $255 million and if one looks at the net earnings for the group and that net earnings excluding gains and loses on foreign exchange as well as exceptional items that dropped to $71 million for the quarter down from $76 million in the previous quarter.

I think with that brief heads up on some of the salient features for the quarter, let me ask Nick to take you through some of the salient features on the Western Areas hedge close out as well as some of the impact of the capital rising that we recently undertook. Nick over to you.

Thank you and good morning and good afternoon depending on where you are. If we look at the Western Areas hedge, I think it would be useful to recap that hedge was retired at the end of January 2007 by buying the delta in the market of approximately 1 million ounces and that was done over a four week period which straddled over the Christmas period itself.

Our rational for that was that this was an uncapped liability and we believe that the gold price would go higher. That delta was accumulated and settled against the hedge shore position itself on the 13th of January and a realized profits of $21 million was generated. Since we acquired the long position in gold, in other words the delta, at an average price of $622 per ounce and we liquidated that long position into the hedge at a price of $643 per ounce. $18 million of this gain is included in the current quarter with the balance accounted for in the previous quarter.

Since the hedge closed out the gold price has further increased and for $663 an ounce at the end of the quarter. And based on this prevailing price a further $28 million of losses on the hedge have been averted. In the current price is even higher and should the current price hold clearly the opportunity losses will also be avoided.

The net effect is that had we not accumulated the delta, the accounts would have been $21 million worse since we assumed control of Western Areas on the 30th of December last year. The hedge closure itself resulted in net debt levels of $1.9 billion way above previously announced targeted debt levels of between $500 million and $750 million and to put that in perspective those figures represent around about 50% of annual EBITDA at the lower end and about 75% at the upper end given for value process.

Right after this is the fact that we are going into a capital intensive period in this group with both growth and launch extension projects as well as ongoing sustaining capital to maintain operations of where they are. And this is requiring between $800 million and $900 million for the next fiscal year to June 2008.

All that capital expenditure in getting the territory projects into production early next year and also the mill expansion and heap leach expansion in Ghana. As well as the drop down project in South Africa that have commenced and also the South Deep capital expenditure which is necessary to get that operation up to higher levels of production.

Now to put all this CapEx into context the EBITDA for the current quarter by the end of the [third] year was $255 million. Now that is a good proxy for operating cash flow in the group that annualizes us at about $1 billion a year. That would not leave much room for funding the dividends, tax payments, Greenfield explorations etc.

After this the potential price volatility and it became clear that it was imperative to recapitalize the balance sheet. So the [inaudible] was completed during the first week of February and the relative net amount including [accretion] of $1.4 billion. That equity rating has reduced net debt at the end of the March quarter to $600 million. In another words that's gross debt net of available cash resources and that's talking about net debt and to within the targeted band that I eluded to earlier. With that I will hand you back to Terence. Thank you.

Thanks, Nick and good afternoon and good morning to all. As Ian said the South African operations experienced a very difficult quarter with the seasonal break, but I think it's worth pointing out that Beatrix and Kloof were the two main issues which affected our performance. The ultimate production for the quarter for the South African operations with 657,000 ounces and at a total cash cost of $399 an ounce and an operating margin of 35%. As far as Driefontein was concerned it was a -- to me a good performance, there was a nice improvement at 251,000 ounces and the margin a sum of margin of 43% and some of the quality factors that helped that mine in terms of an improved micro factor we must welcome.

Kloof continues to disappoint albeit that the mine coal gold recovery with an 8% increase in mine coal sector to 90%. But offsetting this was a reduced mining volume and value and the value had actually dropped from something of 2000 thin grams for the quarter to 1760 thin grams for the quarter and this was on effect of variability and [slurpy] at four, seven, eight and nine shaft during the quarter. Ultimately, this imply the names that we have reproduced 230,000 ounces for the quarter at an operating margin of 38%.

As indicated while this was the first full quarter of South Deep and with Gold Fields and there were many changes and challenges at this month for the quarter. We did -- we were quite successful in the terms of the build up and the re-commissioning of the twin shaft system and that alone is quite destructive. We had to change the flow of people and the materials away from the south shaft to the twin shaft complex during that January, early February. The other thing we did do is realigned the mines with our -- the reporting period and that lost us seven days of extra mining between the quarter.

As far as the staff is concerned one of the challenges we had is a high level of turnover especially on the tractor section and we are doing all in our power to make sure that we can retain staff and that being going to all sorts of projects throughout South Africa and it's a particular challenge that we hope to meet in this coming quarter.

The integration of Gold Fields is ongoing as we are looking at many areas from financial to human resource management to laboratory services, etcetera, and we hope to get these datas done in the next couple of months. Production and margins at this mine still needs to improve from the reported levels with all the gold sold was [inaudible] done under the guidance at 75,000 ounces. The intake was a huge challenge for us at one, two and three shafts for the quarter all fit by a good performance at full shaft. Mine core factors that predominant problem and it comes out of three shafts and this was disappointed and ultimately meant that we produced 119,000 ounces at the low margin of 31%.

Looking towards the future and not forgetting safety and transformation and everything else that we were required to do yet and we aimed to do at the South African operations. I would like to focus a little bit on our operational excellence. The building blocks of any mine and in particular our mines is development and one of the things that we are focusing very heavily on are the development rights and the amount of development that we are actually doing. It will give you an indication of that commitment to development between 2005 and now we have actually increased development people or our development crews on Kloof, Beatrix, and Driefontein about 34% in the period. And that's going to grow as we continue to build up production of development rights and through to financial 2008 and 2009. To give you and idea we looking at [recently] and currently we are going to produce something like a 5 km of unleased development for this coming year. In the next year, we are asking that is going to go up to 7 km and it will probably stand round about 7 km at Kloof and that would be on the back of what's going to be happen at 7 shaft where ultimately we completed all the timely development and at the Beatrix, as an example, we are probably going to hold something up thinking raises within the next 18 months and actually have between six -- move from 6 km to 10 km for the year. So this is a very important component of the business and that's something that we are driving very hard.

South Deep on it's own, we need to get appointed, we need to commission everything below 95 level and a consorted effort as we can set a lot of capital going to expending on the developments required to go into the [Elkburg] areas as well as the VCR areas on this mine. That would in all likelihood commence in this September quarter.

The other key part of the business is obviously what is happening on the [inaudible] and we remain focused on volumes and quality on our gold. A lot of what we are seeing for instance at the Beatrix we have covered the goal as far as our gold is concerned and these opportunities that we got to keep driving and will keep driving to make sure that we can deliver on our gold production.

Productivity still remains key, one of the main initiatives that has been introduced, is something that we are really pushing on all the main options of all our shops and there is stimulation and then ultimately measuring and improving its aim that increasing the flow of materials and people in and out of the workings as well as making sure that we train everything that is wait to wait and all-to-all. I have certainly fixed up in certain instances, we are diluting or actually hoisting and we are making sure that we have duplicate systems in terms of making throughout all of the South African operations.

We have had some issues especially at the deep level mine, and the failure and rehabilitation does create problems for us and ultimately we end up in evaluation situation. As far as growth is concerned we have appeared [inaudible] place for something about six weeks now. They are evaluating how we intend to exploit the combined Kloof and South Deep operations. This was a fairly complex job as there are many, many interdependencies and they work as on going and as soon as I have some answers and we have some answers, we will let the market know.

The other key project for us is Nine Shaft at Driefontein. This is on track and we certainly expect this to commence sinking in October or November 2007 and with that I would like to hand it to Glenn.

Thank you and good day all. Despite a disappointing performance during the past quarter the longer term [INAUDIBLE] for the international operations remains positive. Overall gold production was low for various reasons at all of our mines with operating costs rising at the same time. Action plans to improve both production and mitigate rising costs have been put in place for all operations and we expect that these actions will improve results going forward. Turning to production, the international operations produced 397,000 ounces during the quarter, which is 7.8% lower than the previous quarter. Let us look down at first, the total output from the Ghanaian mines was down quarter-on-quarter by about 3% to 223,000 ounces. Tarkwa mined excellent tonnages during the quarter but the grade was lower resulting in a decrease in gold produced to 4,500 ounces to 1,743,300 ounces.

The main produced 48,500 ounces in the March quarter compared to just over 51,000 in the previous quarter. This reduction was a result of lower availability of high grade fissure and as a result of energy disruptions experienced. These power disruptions, however, affecting top or end of May are likely to continue into nominal 80 megawatt plant project shared by ourselves and AngloGold [inaudible] Newmont and Golden-Star is completed in first quarter of 2008. Costs for Tarkwa were higher because we crossed the running line power generation in line with the maximum load shedding requirements and the increased price of consumables such as cyanide. Damang's cost levels remain similar to the previous quarters at about U.S. $450 per ounce. Moving on to Venezuela production of Choco 10 declined as expected to 8,200 ounces this quarter, earnings are consistent with the shortages. By the end of the quarter an additional 5 water bolt holes had been installed, however, as part of the water exploration program. There are another two new bolt hold targets that are planned to be drilled in Q4.

There is a process, which needs to be followed to get the license to come pump water from the river approved. We will continue to look forward to the successful outcome with all stake holders, we do think that it is unlikely that we will have to wait for six months to have the license approved and we expect it considerably sooner. Essentially, the approach at Choco 10 at this stage is to continue mining and stop prior work that cannot be treated due to water constraints affecting the mill. With respect to the Australian operations total output in the amounts of 266,000 ounces, which is about 6.5% lower than the December quarter. At St Ives the 4.2% reduction to 119,400 ounces was due to lower than expected tonnages from under ground and the closure of the Thunder and West Range pits. The positive from underground production however, was the increase from 5.2 gm per ton to 5.5 gm per ton quarter-on-quarter as a head [inaudible]. At Agnew gold production amounted to 46,600 ounces which is 12% down on the previous quarter.

The underground physical performance was only 2000 tons short of the December quarter's 100,000 tons, however, the grade was considerably lower at 9.7 gm compared with 13.1 gm a ton. This was largely due to the resequencing of the high grade [inaudible], which was becoming geo-technically constrained at depth. The operating profit at St Ives resembled the previous quarters of about A$300 per ounce. The increase however in cash costs was mainly the result of reduced production. Internal cash costs increased [inaudible] by A$74 per ounce to A$334 per ounce in this quarter was mainly as a result of lower production and lower volume. Turning now to capital expenditure, overall CapEx reduced by some 16% during the quarter from U.S.$233 million in Q2 to $195 million in the third quarter. We can report good progress on some of the key capital projects during the quarter, firstly at [TAPA] with CIL extension project is still on track for completion in the early part of the second quarter of the 2008 financial year. As mentioned the Joint power station project should be completed in the first quarter of next year.

Damang is continuing with its peak topic which is progressing well and we should see smoother production from the mine in 2009 with [inaudible] being established. In Australian CapEx at St Ives increased by A$4 million mainly as a result of the development of all sources. At Agnew the CapEx was reduced quarter-on-quarter primarily as a result of the completion of the current [inaudible]. Into Q4, I believe I can give you a fairly good indication of our performance, we see a slight improvement in the Ghanaian performance with similar levels of production for Tarkwa but improving performance at the mine. At Choco we expect the draft to continue to have an impact on production during the next quarter of Q4 until the rains begin. Hopefully the rains will begin in the second half of May then we hope for enough rain to replenish the mines main water level as well. At the Australian operations we expect similar production levels at St Ives and an increase in production at Agnew.

With respect to our monetary forecast and bearing in mind that I have only been with gold fields for a short time, my first point is that we are in the middle of detailed planning and operational reviews and I will be in a much better position to give a more complete view going forward at the next set of results. However, with that in mind I do see a positive trend in the planning so far, specifically in Ghana with the benefits of CIL expansion at Tarkwa, the top brackets remain and the commissioning of the new power plant.

I understand there are technical issues at Agnew which appear to be coming to an end and that a return to more normal performance is in order. At St Ives the great issue is foremost in our minds and blending grades from a number of new sources should positively improve the performance overall.

Finally, Choco 10, let's be clear that it's not only water but the typical issues in developing of mine to full production with are all challenges. However, I see the team is having the right mix of skills to address these issues. I do think that without getting into specifics by seeing improvement with the performance of the international group of operations coming. And that I will be visiting each mine over the next 6 to 8 weeks with a view to concerning the more complete lumber some view.

To end, I would like to confirm that we will place significant emphasis on the volume and grade, optimal production relationship while focusing on the key trust drivers of each operation. Thank you.

All right, good afternoon. Under the present development center I will talk about the Corona project in Peru first following the community related disruptions that we had in the December quarter we had a very smooth performance through the March quarter, the community relationships remain stable and we have reached record levels of local worker involvement on the project as well as the use of local contractors, and in fact at the moment there are some 900 local inhabitants working on the site at the moment. On the engineering front, work is largely complete there and in fact the external engineer has now handed over just about all the work to the Gold Fields team that will be running the project from here. The most significant development on the engineering front was the completion of the design for the revised [tailings design] or [inaudible] management facility as we referred to previously. We have mentioned previously that the turning design, you call it the most complex part of the project and most risky from a capital and shipload point of view, which is why we had this look at the revised design. We have now proven the revised design, which is simpler and cheaper to construct and we will be moving forward with the execution of that design. So that is a significant hurdle that we now have got through on the project. On the procurement front there are no particular problems, we are down to the last two large orders, the most significant of which is the construction of the tailings management facility embankment. And on the delivery front, some of the very larger equipment like the [moles], have in fact started to arrive in Peru at the moment.

On the construction front, there were three main areas of progress, the plant area which we reported in the December quarter was really in a [inaudible] stage was handed over to the civil structure and mechanical contractor in January as expected and we now affirm to see a concrete foundation for the whole plant area starting to come out of the ground within reasonable rates. The other area of significant activity is the construction of a very large [hoard] from the plant area down to the tailings management facility embankment, which is a very large for the construction and the third area that we look at the moment is the stripping in preparation of the footprints of the embankments for the tailing.

On the mining operation front you will recall that we commenced mining operations quite sometime ago. We indicated in our detailed report that we didn't quite achieve planned volume due to rain and some other issues that's associated with the mining. This is not critical from a project timeline point of view and in fact going forward the large portion of the mining fee would affect the use of about full for the construction of the tailing embankment from here through to the end of the calendar year. In terms of outlook our estimate in the capital remains within the number we have given you previously of $343 million to construct this project and our scheduled guidance remains the same, which is that we expect construction to be completed by the end of this year, early in January of 2008. And the tailing management facility again remains the most critical aspect of that timeline, but at this stage, we can see the elements of that hanging together to keep up on the timeline of producing concentrate at the commercial level in the first quarter of calendar 2008, so that is the March quarter of '08.

Moving across to [inaudible] on the Essakane project very briefly in line what we said previously, we have now actually executed the detailed operating and ownership agreement with our joint venture partner Orezone, which is a very satisfying point to moving forward and the feasibility study continues underway at the moment and we expect to complete that just off the mid year in the September quarter of 2007. And we did report in details of the book that we have completed a new results estimate for Essakane and that's on a 100% basis is from 43 million tons at 2.4 grams per ton for 3.1 million ounces and this was contained in the $650.00 [conceptual] pit shell and above a 1.0 gram per ton cut-off grade. And you can reconcile this with some of the other numbers we have given previously and in fact the numbers reported by Orezone, the number I gave you was at 1.0 gram a ton cut-off, we have done that because that's consistent with our previous reporting, but if you had looked at this 0.7 gram per ton cut-off which is closer to what we thing will operate at the results will move up to 61 million tons, at just below 2 grams a ton from some 3.8 million ounces. So, reasonable progress we made at the Essakane. With that, back to Ian.

John, thanks very much indeed. I think, just before I move onto my final comments, just one other issue. During the quarter, we successfully completed the buyout of the minority of the Western Area shareholders, so that means now that the South Deep acquisition has been finalized. Gold Fields is now the 100% owner of Western Areas Limited. And the share capital of the Western Areas Share Capital and the Western Area listing was actually terminated on the 30th of March, so that seems to close the complicated ownership structure of the South Deep project, and has put South Deep now entirely 100% under the ownership of Gold Fields.

And just in conclusion, it is fair to say that this is not been a good quarter for Gold Fields, I am sure all of you are disappointed with the performance that we have delivered in this quarter, but I can assure you that none of you are as disappointed as we are in the team, but I can assure you that we are looking at all ways to be heard from both Glenn and [Timmons] about some of the initiatives that we put in place to improve quality volumes, to improve our flexibility, to make sure that we maintain a tight grip on unit costs, as well as improving after activity and I am confident that with these initiatives in place, that the performance that each of our operations going forward will improve. And importantly will assist us in capturing the margin that is inherent in the current Gold plan.

I think, finally just looking at guidance for the upcoming quarter certainly we see an improvement to back over the million-ounce production on an attributable basis and with a consequential slightly lower unit cost of production as well. And with those final remarks, let me now handover to the operator. Let us open up for any questions that you may have on the floor.

Thank you very much. [OPERATOR INSTRUCTIONS]. Our first question comes from the line of Victor Flores of HSBC. Please proceed.

Thanks, good morning. Ian, could you give us a sense of how the ramp-up at South Deep is supposed to progress? How many tons you will be getting out of the twin shaft? How many tons do you expect to be getting out of the old shaft systems? And how those grades will evolve over time, because I realize its early days, but we want to get a sense of where this is going to go over the next couple of years?

Yes. Victor, let me hand you directly over to Terence to give you a feedback on that.

Good morning, Victor. I think first up-- if you look at where we are going, since we have taken over, we re-started off with in January with pretty low production rates and underground furnishes. And we bolstered up that drastically to April from 77,000 tons to 128,000 tons, which was actually in the April month, so that's buildup is ongoing. If you look at the splits and we still need to operate one shift out of the South shaft system, while we actually -- in fact go to a [couple of program Q2 events at shaft] because we still need it. And we are operating two shifts out of the twin shaft complex. So at this stage we got two grades of ore coming out of tools and a third coming out of the South shaft system. If you look at the build-up beyond that, as Ian said little earlier, we are going to our operational plan reduce and we are certainly looking quite a lot as what's going to happen into the future. We -- at fairly start, we are still talking round about 70,000 to 80,000 ounces coming into the next quarter. [Inaudible] we are going to the operational plan period and at this stage, we probably are still keen -- not keen, we are on track to get up to something like a 100,000 ounces per quarter. Beyond that -- I wouldn't really like to say right now, because we have a keen [interest] as I said little earlier, which is looking at this whole complex and is looking at the strategy and as looking at the build up to 800,000 ounces per annum, which is ultimately, what around is 350,000 tons per month case. So that growth is ongoing and the best guidance I can give you on that is to stay with what was given out by our visionaries at the time. If you look at grade and undergoing grades have improved from just something under 4 grams a ton in January, we currently in April overall from underground to just below 5.2 grams per tons. There is probably still quite of lot of work we can do in terms of dilution. If you look at the development values that we have seen, the values are closer to 6-6.2 grams per ton and we certainly expect that we will be able to get closer to the 6 gram per ton, as we move into the new operational plan.

Great, thank you. Looking at the follow-up on the financial side of things. Could we get a rough breakdown of that capital spending for fiscal '08?

Yes. We can do that offline and we can do breakdown offline too.

Okay, that's fine. And wish to like just to ask -- one final question on exploration, one of the reasons for buying into Choco has been sort of the regional exploration upside-downside and unfortunately, I spend a lot of time talking about the issues there with the plans in the water front, we haven't really got in the picture of how the exploration is evolving, and I was hoping you could give us a bit of an update?

Yes. We don't give [inaudible], but certainly the past year, I think we have seen a successful year, when it comes to exploration. When we give the details of the 2007, we gave an unpublished number statement. We will be publishing a number for reserve at Choco which is going to be higher than the last quarter, also the last year or the take on balance, reserve balance if would you like. I wouldn't like to divulge that number at this stage but just to say that this being a--I think a very pleasing net increase looks more important if we, as you said, we both [inaudible] because we saw a good potential in the area and I think that the results of the exploration program over this past year, if anything have exceeded our expectations in what we see is the potential of the area. So at least we see some good news coming out of Venezuela.

Okay. Great, thank you very much.

Thank you very much. So, ladies and gentleman, your next question comes from the line of Muneer Ismail of Deutsche Bank. Please proceed.

Good afternoon guys. With regards--Ian this one is for you. With regards to the South African Operation, do we have a mine flexibility problem on the South African Operations? Are we behind what they probably [inaudible] focused on it, I am not sure if this is just a strategic overview or is there is a problem with regards to the flexibility on the South African mines.

I think just giving you a very high level response to that, I wish to give a little bit more detail afterwards, but certainly about 18 months ago, we recognized that's -- during the period of protracted low gold prices where we closed down some of the lower grade development areas of our mines but kept the pro areas up and we recognized that we needed to step up development rates and that is exactly what we have done over the past year and half if you track [inaudible] development plan. We believe that we should be doing it even more than we have done in this past year and I think that is what [inaudible] is alluding to. So bottom-line is there are certain areas on some of our operation where we are not happy. One of key areas is [inaudible] and that is definitely an area where some of the developments has been very challenging. We had to go through some very, very difficult ground conditions managing or developing through [inaudible]. We should really slow down some of the [foothold] development. So that has impacted on that particular shaft -- it's not true of all of our operation and I mean certainly from [inaudible] Driefontein. I think Driefontein is in a fairly, steady situation and on specific shaft from Driefontein, things are going particularly well and of key shaft there are five shaft in one shaft, the development is reasonably well ahead of it and we got good flexibility which certainly clears [inaudible] vertical and there are some issues there and I think we will know the problems of Beatrix full shaft, they are being addressed and just when we think we are getting ahead we smacked again. But we are not giving up there because that is a good [inaudible]. So high level, some areas of concern but it is not an issue, it is now. We have reacted to it over the past 18 months and over the next two years, we certainly see higher levels of development across the [inaudible] operation to actually help improve our mining flexibility even further.

Sorry, your second question -- if you don't mind, I guess it will be--you would be [inaudible] if you talked about Uranium. What is the view now on Uranium and Gold Fields strategy going forward? I am sorry if I have missed anything that you might have released in the press that you had today but just give us some idea where you sit from a Uranium point of view? What sort of resources are you trying at it and what are the potential strategies open to Gold Fields on this?

Okay. Look. I guess there are two key Uranium resources within Gold Fields. Firstly there is the [slime stone] with the Uranium contained there in the slime stone probably of a fairly diluted grade and then there is the [revisory] Beatrix full shaft which is an entirely separate [inaudible]. If one looks at the [inaudible] above 1300 meters built below the surface is about 31 million tons, which gives us around about 63 million pounds of [U308] and just under 3 million ounces of gold and that sounds quite nice that but that gold is at a grade of about 2.5 grams per ton. So it's really below current pay [inaudible]. In the combination certainly at current Uranium process, this is a very attractive asset. We have had expressions of interest from a large number of people who are keen to either work with us or in fact to buy out from it via the [inaudible]. And we are busy reviewing all of these potential offers and we'll be seeing whether we will or we won't be monetizing this asset at this stage but certainly we recognize the value in the Uranium. I think the challenge for this team is to come out with the best way of extracting values as shareholders in the most efficient manner. And certainly that may include the potential sale of the [inaudible]. If one looks at the [tailings] and we have previously drilled at all of our dams; we know which ones are potentially high grade but whether or not there is sufficient volume to sustain the stand alone that Uranium recovery section from just our own [slime stones]. I still think there is some work that needs to be done there. So we are certainly looking at how best we can extract that value.

Okay, thank you very much.

Thank you very much, ladies and gentleman your next question comes from the line of Paul Durham, of HSBC Securities, please proceed.

Yes, good afternoon gentleman. It's a question so bit of follow on from Victor's so it is pretty more directed to Ian than Glenn as he is not been there for that long. And it's sort of the same question in a different way, I mean clearly you spent a couple of $100 million buying [inaudible] you spent some more money subsequently and you can have to spend quite a bit more on getting the thing up to speed. At what stage do you say listen just the amount of money that we are going to have to spend or the potential to sort of double the reserves means we can't really get the right economics for this project to work and bearing in mind it is sort of relatively small in the overall scheme -- Gold Fields scheme of things, is there a point in time where we say listen it's something that we, it was a sort of an experiment, we just can't get the economics to work or are you that still confident about the exploration potential and the fact that you can get the mill up to the right size for a reasonable cost of the economic so it actually can work?

I was told that the answer to your question is that I haven't seen anything at this stage on the economic side that makes me believe that this was a bad acquisition. We may have underestimated many things about the acquisition of [inaudible] in terms of the logistical difficulties of working in a new country and off getting it to speed with the way that you operate in Venezuela. But probably the most significant thing that we, I think we have underestimated is the potential of that whole body in the region and on that basis alone, I do think this is going to be a very, very attractive asset. Certainly, the water issue was, it was identified during the due diligence and I don't think any of this expected in the middle of the rainfall that are going to have 10% or more in the rainfall and that really caught us off sides and certainly the process that was put into place by the previous owner at the time [inaudible] and it has taken longer than anticipated to get past. But I am confident that we will get it eventually. It's just frustrating [as hell] waiting for the approval to come through. But I think it is an excellent asset, and I must say that water aside and it would be nice to see this continuing in the Gold Fields stable because whilst it may not be an asset that is necessarily going to be pumping out 100s of--1000s of ounces a year, what it is going to do, its going to produce Gold at a very, very good margin. It is going to give us, once it's up and running, it is going to give us very, very good earnings. The challenge is to get it to that point, and I think we will get there eventually.

Okay, great. Thanks a lot. The key message is that you are going to persevere with this. You are going to make it work.

Now, we will take one last question.

Certainly ma'am. Our last question comes from the line of Alan Cooke of J.P. Morgan. Please proceed.

Hi, good afternoon ladies and gentlemen. Just quick question, just going back to South African operations, you pointed out that the big drop in graded Beatrix was a mine call factor problem. Could you perhaps elaborate on that -- from the Kloof mine call factor improved -- you had nice improvement that came back 80% to 90%. Could you just give us what the mine call factor at Beatrix was and the reasons for that precipitous drop in the grade and then also at Kloof the lower grade slope reef areas that you say that you are moving back into. Are you going to be able to hold the grades the -- the current grades there, or we are going to see a similar drop in graded Kloop looking forward?

Hi Alan. As far as Beatrix is concerned --yes we had a mine call factor of 78% and we came off higher last quarter -- not a higher, but [inaudible] a mine call factor of 90%. If we look at the actual grade mine quarter-on-quarter the problem for us is been out at 3 shaft and reminds us -- just on 1,090 centimeter gram per ton, which was very comparable quarter-on-quarter. The issue for us that has really being one of a shortfall of [gold] and lack of [sweeping], so those have been the drivers, which have got us to this current position and we are doing everything in our power to obviously look at accumulations and what needs to be done about it. We had to have some organizational behavior issues with the sweeping standard, which we obviously are trying to enforce—that was an issue around what we call [dry sweepings] and we hopefully have resolved that. And as you know once you get the accumulations out your mine call factor overtime generally comes right. So, as far as looking forward is concerned, I expect that the grades that we currently mining even though it is quite difficult and flexibility is tough with the lot of crew moves to keep the actual grade up. It's -- we are going to see an improvement. Half of the issue at Beatrix during the quarter was also volume and that was as a result of for instance in February we had 23 crew moves just in that 3 shaft alone and that's very, very destructive. So, we are hoping that that development that I spoke about little earlier where we hope to raze some -- to hold -- some 50 razes in the next coming two years and that would alleviate the flexibility problem. If we move on to Kloof, I don't believe that we will continue at the low values that we currently are experiencing that 1,700 centimeter grams per ton. The expectations are that we will improve. We did come off in terms of 3 shaft and some of the higher-grade areas, some of higher-grade pillars. As you know -- as you can imagine it's quite tough operating pillars at 3 shaft depth and we weren't in position in many of those areas, but some good progress has been made in terms of opening up and getting into some of the higher-grade pillars. As far as 4 shaft is concerned, Ian did allude to it a little bit earlier -- we need to hold some of those razes at 41 and 43 level and ultimately get to restore the values back-up to around about 2,010 grams from the current base of 1,700. At 7 shaft has performed very well and even though we do have the slope and the terrace issue there as well, but they are able to manage it and they have done actually pretty well and I expect them to continue into the future. Overall, while we don't expect Kloof to rocket back to some 10 grams per ton from underground. If I look at April for instance we come off a low from January of 7.4 grams per ton from underground. In April we actually had a grade of 8.6, so it does show that we are able to -- at this stage we are managing to increase the grade again.

Thanks [James]. Another -- that was the last question; just while we are on the subject of development growth result, any comment as to the values in the reported development results [inaudible] Kloof, Beatrix and Driefontein there are some drops, quite a large drops in the values and the development results and that's goes to grade in the medium term, I guess not in the near-term?

Yes, you are perfectly correct there. Yes we had had some changes if I could stop at Driefontein some of the carbon leader values were below expectation. As far as 5 shaft is concerned remember that we don't get full exposure on our all of our razes because of the width of the ore, so that is one factor. We are also going through a big unpaid area on two raze [lines] on the western side of 5 shaft, to the eastern side that we have some very high-grade beyond 50 level, but we have [inaudible] event there last September, which we are [busy] doing a look around and we are hoping that we will get through thereby by the end of this month in actual effect and get back into those high-grade areas. As far as one [inaudible], which is also part of the future that has concerned the values we expect there and that's brought -- we have the venues above the [1T] in another words in the mined out areas. We are expecting to going into some lower-grade areas of round about 1,600 grams as centimeter gram per ton and we will see that for the foreseeable future.

Moving on to Kloof, the key for us there is some of the high-grade areas, the high-grade razes, the double deck razes at 4 shaft are just not advancing at the rates that we desire and ultimately once they hold it will get us to a position where we can mine at higher-grades. We are also mining in the main shaft pillar, but we are not doing that at any great rate but that will also up the grade. The 7 shaft ostensibly is out of primary development and all we need to do there is secondary development and we will be looking to moving to the terrace areas as far as that is concerned. The other low-grade that we have reported is out of waste or out of the 4 shaft at Beatrix and that reported at something like 810 grams. We only have two razes at present going at that shaft one is in zone 5, which is the high-grade [inaudible] and that returns good values of 1,810 gram, but the other one was out of the zone and we are moving through some low-grade area and that was only 500 and that's the reason for the 800, but you can see in the actual report that there were only 132 meters as far as that was concerned.

Thanks very much James.

Thank you very much and I'll like to turn the call back over to our speakers for their closing remarks please.

Okay. Thank you all everybody to listening in today, as I said previously we are sorry to have disappointed you with these results and we look forward to the June quarter and our year-end and where we can actually report a healthier kind of results. We look forward to talking to you then. Thank you all very much and goodbye.

Thank you very much sir and thank you ladies and gentlemen for your participation in today's conference call and this concludes your presentation. You may now disconnect.