Gold Fields Ltd (GFI) 2008 Q3 法說會逐字稿

Good afternoon, and welcome to the Gold Fields Third Quarter Results. All participants are now in listen-only mode. And there will be an opportunity for you to ask questions at the end of today's presentation. (OPERATOR INSTRUCTIONS) Please also note that this conference is being recorded.

I would now like to turn the conference over to Willie Jacobsz. Please go ahead, sir.

Thank you very much, [Dillon]. Good afternoon and good morning, ladies and gentlemen. Thank you very much for joining us here for this conference call on the third quarter results of Gold Fields. This is a special event in that Nick Holland, our new Chief Executive Officer, will for the first time be in the chair as CEO on a conference call.

The process this afternoon is that Nick is going to make some introductory remarks. After him, Terence Goodlace, our new Chief Operating Officer, will make some remarks. He will hand over to the new head of South African operations, Mr. Vishnu Pillay. After that, Glenn Baldwin, the head of Australia and Ghana operations will make some comments. And after that, Juan Luis Kruger, the head of our South American operations will make comments. We will then pass back to Nick and then take some questions from the listeners.

Nick, I'll hand over to you.

Thank you, Willie, and good afternoon or good morning, everybody, depending on where you are. First of all, I must say that my introduction as the new Chief Executive of Gold Fields has not been an easy one. And on the 1st of May, it commenced with a multiple fatality of nine people at our South Deep operation due to a cage, which apparently fell down one of our ventilation raise holes. And that whole process is being investigated in conjunction with the DME. And in the week prior to that or in the days prior to that, we also had a multiple fatality at Driefontein.

So, we've had a very, very bad run of safety stats. And certainly, my view and the view of the management team in Gold Fields is that we're going to be doing something very different on our operations in South Africa. And certainly, we'll be reviewing our safety plans again and looking at how we're enforcing them, making sure that our policies and practices are appropriate.

And we're also going to commission an independent external international review of our operations here in South Africa because we are striving for world standards, as you can imagine. We want to be judged in line with world standards. So, we're going to be doing that, too, and also re-looking at some of the pillar and remnant areas in particular that we currently may be mining or going into and seeing ways in which we should cut back. And in fact, some of those have already been cut back as you'll hear in the presentation. So, I think we wanted to start off on safety because of the particularly difficult last couple of weeks we've had.

Turning over to what's happened on the leadership changes, I have mentioned my appointment went effect from 1st of May. And also, Terence Goodlace, who most of you know has been in the group since it was formed, is now the Chief Operating Officer of the Company. Previously, he was the Executive Vice President in charge of South African operations. And he's also a member of the board of directors.

Under him, we have Vishnu Pillay, who was head of Driefontein, who's now stepped in to be head of South African operations, a very, very experienced campaigner, has been in the group for over 20 years, knows our operations intimately well.

Glenn Baldwin, who most of you know, head of our Australian garner, will continue to do so in that role. And then also, Juancho Kruger, who's the head of our operations in South America, based in Lima, and also going to be responsible for a mine that will be coming into production during the course of next month. As soon as that clears, Cerro Corona is on the verge of coming into production. So, we're very excited about that. And he's going to tell you more about that later.

So, that's the leadership changes, and pleased really to report that it's worked pretty well. The changes have been pretty seamless. And I think if I look at the team around the table and the sort of week we've had, it's hard to believe we haven't been together for longer. So, I think it's working pretty well.

I want to summarize very quickly some of the key things we're doing and then just give you some headline stats for the quarter. In South Africa, I think the key issue is to say that we have stabilized the power situation. Most of you can recall we had power interruptions. We have had stable power supplies now for most of the March quarter. And that looks like it's going to be a lot better.

We had a week stoppage, as most of you know. And there was a slow ramp up thereafter. So, that has impacted the production in this quarter. Going forward, that's going to be a lot better. And Terence will talk more about that.

Corona I've spoken about, that that's coming to production. The Tarkwa expansion, that's doubling the size of the mill. That's expected to be in commission during the first quarter of fiscal '09, in other words in the September quarter. And that should add somewhere around 80,000 to 100,000 ounces a year as well, so pretty exciting project. And Glenn will give you a quick update.

And then, South Deep, despite the accident we've had, this is a project that is gathering momentum. There are a number of important milestones. And Terence will take you through that. And at St. Ives, important to note that although we've had a disappointing couple of quarters, we do see light at the end of the tunnel in that we're bringing in two new underground operations, which is certainly going to improve the overall production profile. And I think in the second half of this calendar year, we should see St. Ives doing around 10% to 15% better than what they are.

And then in terms of exploration, we are going to be more aggressive. That's going to be part of our strategy in looking for possibly smaller deposits than the rule of five. The rule of five, so it's 5 million-ounce deposits. Instead of that, we are going to move back to rule of twos. We'll keep rule of fives. In other words, we'll still be looking for 5 million ones. But we're not going to preclude ourselves from smaller deposits, particularly if they have shortage paybacks with good margins. And that means we can go further up the risk curve possibly than what we'd otherwise have done because it's smaller exposures for the group.

I think the key strategy that I want to knock on to people early on is that we are focused on all-in costs. Now, a lot of people talk in this industry about their cash costs, how good their cash costs are. I'm much more interested in what the total costs to the business are. Now, what's the total cost of producing that ounce including the sustaining capital? That's what our focus is going to be. We call it notional cash expenditure for want of a better word. But it's the all-in costs of production, cash and capital, because that's what drives free cash flow. And that's what drives margin. And that's going to be our focus going forward.

So very briefly, the results for the quarter, and then I'll hand you over to Terence. Attributable production 14% down to 827,000 ounces, that's really on the back of a decline in South Africa, which was expected. And in fact, we gave guidance on this in February that we expected our production to be down. So, we're pretty much in line with the guidance we gave. And that's really mostly on the back of the power issue.

Unit cash costs, as you can imagine, have increased because of the lower production. They've gone up 10% to $513 an ounce, not as much as in lower currency terms because the rand has tended to buffer us in this regard. So, if we could get our production closer to the December figure, then we could actually get our cash costs back in dollar terms a lot easier with the shielding of the rand.

Our operating profit up 26% to $347 million from $299 million the previous quarter. And our core earnings doubling. Core earnings really is if you take out the financial instrument changes, the exceptional items and what have you, that's doubled from $68 million last quarter to $138 million this quarter. So, I think the key point there is despite the power issue and the 14% drop in production, because the dollar gold price has gone up 17%, and because the rand exchange rate has also weakened, giving us the benefit of costs, the combined effects of those two has meant that we've doubled our dollar earnings. So, on a per share basis, then, also nicely up from $0.13 per share to $0.21 per share.

Lastly, we have declared a dividend this quarter, which is a catch up, if you like, of the dividend that we would have paid related to the six months ended December. But we didn't pay that because the power crisis hit us. We weren't sure if we were going to be knocked out completely for a period of time, and glad to say that we've got over that. And now, we've made up that dividend. So, we've paid ZAR0.65 a share or around about $0.086 per share, which is about a 40% payout of the earnings for the half year. That's broadly in line with our policy, slightly lower than what we would normally pay. But bear in mind, we've had very heavy capital investment into both Cerro Corona and Tarkwa.

And with those salient highlights, I'm going to hand you over to Terence Goodlace.

Thanks, Nick, and good afternoon, everybody. I'd like to just to reiterate what Nick said about the accidents that we've had. I think we're extremely disappointed with in actual fact what has happened. And this comes off the back of the huge amounts of effort that we have put into safety over, especially the last year. So, it's extremely disappointing for the quarter. We're reporting five fatal accidents over and above what has happened to us over the last two weeks. So, the fatal accidents have increased despite the improving trends, which we've shown on many of our other metrics over the last ten years.

A comprehensive review, which will cover all of the shafts in South Africa as well as we will expand in this to the international operations will be undertaken. And that is at an advanced stage of being initiated and being advanced. We will review pillar mining and our remnant mining strategies and assess what is the best way to take this forward. Currently, pillars and remnant constitute some 20% of our mining in South Africa. And we need to assess this very carefully because, as Nick said, we want to mind safety.

Health and safety plans for the group have been formulated and have been presented to the board. This happened in February of this year. And it's off the back of what we'd seen with our safety performance and the desire to improve all the way.

We've also initiated late last year new technology plans. And the prime reason for the introduction of technology, especially at the sharp end of the business, was to reduce the exposure levels for our people in the work situation. Overall, we're less than satisfied. It's not good enough. But we are going to drive to improve the situation.

If you move over onto -- overall onto gold production, we have come down to 820,000 attributable ounces. Most of that is due to the power interruptions, which we've had in the South African context, where we've come down from 657,000 ounces to 520,000 ounces. Vishnu, as he takes you through the South African operations, will talk in a little bit more detail to some of the other drivers affecting our production levels.

As far as the Ghanaian and the Australian operations are concerned, they were just about on a par for the quarter on quarter. And we're hoping that into the coming quarter, we can have a stock increase from the international operations as well as a 20,000-lb increase from the South African operations.

Moving onto cash costs, we were just over $500 per ounce at the operational level. We're forecasting into the coming quarter to maintain that level. We were helped by the rand, which had weakened over this last quarter. But we're hoping to really save the situation in terms of our production levels and maintain at least $500 per ounce and into the future.

From an inward investment perspective, we continue to spend high levels of capital. And these are after the key projects, which are the Cerro Corona, the Tarkwa CIL expansion, some of the underground buildup at our straight-end mines, as well as the South Deep expansion projects. We expect to increase from just over $277 million this quarter to $320-odd million in the coming quarter. That, however, should come off into the future as we commission Cerro Corona and the Tarkwa CIL project.

If we talk very specifically about the projects, I think we're particularly excited about what's going to happen at Cerro Corona. It's not often that you get into a situation where you take a mine from complete build up to finish. And Juancho will give you a little bit more detail about that project per se.

The Tarkwa CIL expansion, international ops, and especially Tarkwa, have done a great job on this expansion. And Glenn will expand upon the commissioning, which we hope will come to bear early into the new financial year.

The [Sonoz] underground mine build-ups will continue. I was there just a week or two ago. And that's really looking good from a production perspective. And it certainly should alleviate the situation at that mine.

As far as South Deep is concerned, I think it's important to say that we've had the tragedy. It is going to interrupt us over a period of three months. But we are going to continue with the capital programs, which we had announced towards the middle of last year. And those are the exploration projects. The new mine development to complete all of the infrastructure at the shaft as well as the deepening of the ventilation shaft and the 94-level refrigeration project, these are all ongoing other than the new mine development below 95 level, which Vishnu will expand upon in terms of our plans on the way forward.

The other key aspect of this project is that we have recently approved the expansion to the tailings facilities. That is a new project which is due to start in financial 2009. And that's to provide a tailings facility for the next 50 years for this mine. That was approved at the board yesterday.

Finally, onto just what's happening with the Kloof-South Deep optimization, and that is really looking at how we synergize between Kloof and the South Deep mine. As we had said in December, we would pursue [Sonoria 1], which included the South Deep mine operating at 330,000 tons per month and an additional 150,000 tons per month coming through the Kloof infrastructure. We are into that pre-feasible tier right now. We expect that to be completed by March of next year.

And with that, I'd like to hand you over to Vishnu.

Thank you, Terence. Good morning, colleagues. Good afternoon to the others as well. Nick and Terence have alluded to the week of tragedy that we actually had in Gold Fields at South Deep and at Driefontein. And as the responsible head, I express my sincere regret at these instances, where we've lost 14 of our colleagues.

But I guess that the period under review has also had two issues that I just briefly want to alert you to. Traditionally, during this quarter, we come back from our Christmas break, and there's typically a very slow start up on our deep-level mining operations. The reason for that is only to ensure that workplaces are safe and suitable for reentry by our employees.

Secondly, it is very unexpected that we had a significant power outage on the 24th of January. Mines stood down for a week. And we were reduced to sustainable levels of power supply until Eskom restored the integrity of the national grid. I must say that our operations staff had done a splendid job in managing both those situations.

But getting to the results of the quarter, with the exception of Beatrix, you will find that our results for the quarter indicated good management by our operational staff over the last two months. Although production is down, our operating profit is up. And that's largely as a result of the gold price.

To take you through the individual operations and just to draw out the highlights, Driefontein -- despite the multiple fatality of the last week, the mine did achieve 1 million fatal-free shifts at the beginning of the quarter. It was a clear and tacit indication that significant effort has been invested in safety.

The board has taken a final decision on nine shaft. That shaft will be mothballed. And the reason for that is largely driven by the electricity crisis. We'll require an additional 110 MW, which is about 50% of our current consumption. We've also suspended six and seven shaft during the quarter to accommodate the need to work within our allocated power.

During this period, we've suspended a significant number of our labor contracts. The reason for this is very simple. We have come to the conclusion that our labor contracts were not as efficient as we had expected and that our contract costs were no cheaper than mine costs. I guess the other issue that forced us into this decision was that we wanted to bring core business activities under the management of mine leadership.

However, I'm pleased to say that Driefontein's now on an even keel. Six shaft is production ready. And we await labor. And I'll talk to that a little later. But seven shaft is now used as a service shaft. And the ground is being mined from the eight shaft complex. Importantly, as Nick and Terence had indicated, we are reviewing our pillar and remnant mining at Driefontein.

Our outlook for the quarter is only marginally up. And the reason for that is ten shaft has been temporarily closed subsequent to the accident that we had. And we are reviewing our strategy on the way forward. We're also taking a look across the mine at all our pillar and remnant mining. It's quite likely that within the next two months, we'll have some decision on the way forward.

For Kloof, in addition to the power and the Christmas recess, gold production was seriously impacted by a fire at the main shaft complex. That fire came after seismic event that caused the fall of ground. And we suspect that is currently [meet-end] related. I'm pleased to say that that shaft's now back into production.

Like Driefontein, it also suspended its labor contracts for exactly the same reasons. And Kloof currently is also awaiting labor. And I'll talk to that when I talk to South Deep. But three shaft is 50% back on production and eight shaft 40% back on production. And the intention is to proceed slowly into these shafts until we are absolutely certain about the conditions that surround pillar mining at these two shafts. The outlook for Kloof is only slightly higher. And the reason for that is related to our strategy around pillar mining on the mine.

Beatrix has shown an extremely disappointing performance for the quarter. And all its metrics are plunging in the wrong direction. And I want to get straight to the point on this mine. There's just two issues here. The first is volume related, and the second is grade. There's a significant grade gap between what's blasted on the face and what's delivered on the belt. And the new management team on the operation is currently addressing it. However, we will see a significant improvement in gold production this quarter, up to 3.3 tons from 2.5.

I am pleased to say, though, that Beatrix is currently being managed with 90% of its power. And it's quite likely that going forward, we would be able to manage all of that operation at the current allocated levels.

Coming to South Deep now, this is the mine where we had the tragic accident on the 1st of May. And Nick has alluded to that as well as Terence. And I should stress that this mine is a project. It has a new leadership team. And the accident that happened is an issue that we will address over the next three months. And I'll give you some detail on that just now.

But what I'd like to report is that for the quarter, all VCR mining above 95 level has been terminated because of a major structural intersection on that [stopping] horizon. This mine, as a result of the termination of VCR mining above 95 level now has 2,000 excess personnel that needs to be re-deployed. And the plan is to transfer those employees to Kloof and Driefontein to fill up the vacancies that had been left after the reduction in our contract numbers. Discussions with the unions are ongoing. And it's quite likely we would resolve this issue within the quarter.

Our program going forward is that in the next three months, we would have to restore the integrity of the shaft where we had the accident and replace the winder. I should emphasize that this accident happened in a vent hole raise that is situated between the main shaft complex and the ventilation shaft. The integrity of the main shaft is pretty much intact and is not afflicted at all.

As the result of some uncertainty over the restructuring, our outlook for South Deep is at 1,200 kg for the quarter. We do expect, however, that we should be marginally higher than that. And I'm pleased to say that after a week stoppage, employees went back to work yesterday. And there's been no incident to report.

I guess in conclusion, there are two things that I'd like to lift up. And the first is that under the leadership of Terence Goodlace, the South African operations are placed under particular trajectory. And I'd like to confirm that that trajectory will be pretty much followed to the letter. We will, however, be looking at our people and making sure that this principle asset is given the due diligence that it requires in view of the significant skill shortage that we have in South Africa.

In addition, Nick and Terence have indicated the focus on safety in the South African operations going forward. And I will be investing a considerable part of my time into the future shaping the new operational culture with respect to safe production.

To that end, I must stress that the age of technology has arrived at Gold Fields. And the group across all its operations is planning an expenditure of ZAR200 million in the next financial year. And we are looking at making significant changes with the way we do certain underground work.

In conclusion, I'd like to say that given the support that I've received from the operations personnel, I'm absolutely convinced that we intend to steer the ship into the future with a steady hand. Thank you very much.

I'd like to hand over now to my colleague. Glenn.

Morning, good afternoon, everyone. In Ghana and Australia, the safety was vastly improved quarter on quarter with pleasing results at Damang and Agnew, which were both last time injury free.

Managed gold production was up to 370,000 ounces with a strong performance from Ghana, up 7.5%. This improvement was driven by a 7,000-ounce increase at Tarkwa. And there's still a performance at Damang, where production was comfortably back over the 50,000-ounce mark.

The overall cash costs increased by 6% quarter on quarter, which although not good, was marked by an improvement in Ghana, where we managed to control the increase to under 2%. The main drivers for the increase were in Australia, where costs were up 13% due to the lower production from St. Ives and the end of the high-grade stockpiles at Agnew.

I'll now discuss each mine individually. Firstly to Tarkwa, where production was up to better levels and costs were reasonable, considering the much higher energy prices. The two main forms of energy are diesel, which rose by nearly 5% to $1.13 average for the quarter. That's U.S. dollars. And secondly, electrical grid power, which increase was felt for the full quarter at U.S. $0.0025 per kWh compared to the previous rate of $0.06 per kWh.

With an additional couple of thousand ounces, we were well placed to come in with a cash cost approaching $400 an ounce. But we are having extreme difficulty in securing radial tires. And this shortage of tires has impacted on our whole truck efficiencies.

A significant project at the South [Heap Reach] Complex was completed at the end of the quarter and should result in improved recoveries from the deeps for the remainder of calendar 2008.

The CIL expansion project at Tarkwa, which will deliver more gold in the second half of financial 2009 is progressing according to schedule with rock into the mill still planned for September this year. This will increase annualized production to some 750,000 ounces per year when we're at full production through that plant.

To Damang, which was the best performing operation in my portfolio, from a dismal performance in quarter two, the mine turned things around. And production was up nearly 20%. As a result of volume and grade increases, the unit cash costs came down. And the total operating cost increases in energy and mining activities were absorbed.

The guidance last quarter was for similar production due to the failure early in the quarter of the main haulage ramp and the Damang pit cutback. But with focus on higher productivity efficiencies, the new ramp was constructed ahead of plan, which enabled access to the higher-grade areas of the pit. We expect production to remain at similar levels and costs to be slightly affected by diesel price changes.

At St. Ives, the quarter's production was below forecast due to underperformance from underground mines and delays in critical underground projects. [Tave rock's] underground project was delayed by permitting in the open pit and a change in the geological model. Change normally means bad. But in this case, the grades are better than we originally planned. And with more geological definition, we have defined multiple lenses instead of the single reef previously modeled.

The Belle Isle underground project was delayed due to a hypersaline water intersection of up to 80 liters per second, which effectively stopped development. It's good to report that the pumping system has been completed underground. But there will always be some water. And in this case, the water contains about 400,000 parts per million of salt. We are ready to start sloping in Belle Isle.

Total cash costs increased significantly as a result of the lower production. In Q4, the volume component of the royalty in the purchase agreement for St. Ives will become effective, which will add another $40 per ounce at current prices.

At Agnew, production was similar quarter on quarter at 49,000 ounces. Costs increased as a result of treating low-grade stockpiles following depletion of the high grade stocks in February. In Q4, we can expect another cost increase as low-grade stocks are treated for the full quarter, yielding similar production.

As a reinforcement of the guidance I gave last quarter on the future of Agnew, the mine becomes a circa 150,000-ounce producer once the surface stockpiles are depleted, which should happen in the first quarter of financial 2009. Hence, we have expended significant effort and energy this year in identifying exploration targets and then permitting sites for drilling, which requires engaging the local communities.

We are committed to exploring with the support of the communities and embrace the principles of minimizing the footprint of our work on the environment. We plan to double our exploration spend in 2009 as sufficient target sites are now available and restore Agnew to a plus 200,000-ounce producer with a strong margin as quickly as possible.

In closing, the mines in Ghana have improved. And although we will continue to seek maximum production in this high gold price environment, we will do so judiciously with respect to improving safety standards, growing the margin, and maintaining the CIL expansion project schedule.

The Q4 outlook for St. Ives is more of the same. But the underground sections will overcome their challenges. And we look to vast improvements in production from the start of Q1 2009 with the underground projects starting to ramp up strongly.

At Agnew, we expect similar levels of production, but with higher cost due to the full quarter of treating the stockpiles. It should be noted that although the cash costs worsened, the free cash generated is substantial because the stockpiles were effectively paid for last year. So therefore, stable into quarter four, but ramping up projects to start the next year well.

I'll hand across to Juan Luis.

Thank you, Glenn. Good morning, good afternoon, everyone. I think it's very important for us to present today the major highlights of the Cerro Corona project, which, as Nick and Terence already mentioned, more than a project, I would say it's almost reality from an operational standpoint.

During the third quarter of this financial year, basically, we completed important milestones towards driving the project to become a full-fledged operation. Basically, we started by -- the first important milestone was the completion of the mechanical work on most of the concentrator plan. We completed the crusher, filtration, and storage areas. We also completed the energization of our 34-km power line all the way into the Cerro Corona substation. We started impounding water on our tailings facility. And we also started the commissioning process by hiring the commissioning team and the commissioning manager.

Finally, we got approval on a key permit, which is the permit to transport and ship concentrates all the way from the mine into our smelters clients. All of this puts Cerro Corona right on track to basically start with action by July and shipments by August. That means the first quarter of financial year '09. For that to happen, we have a very tight schedule in this fourth quarter of the financial year. We have achieved full mechanical completion already by April 17th. We should be having the full plant completed by May. And we should be done with commissioning by the end of June. That means we'll have rock in the plant by the end of June towards, as I mentioned before, starting production in July.

Given that we're so close to the startup of our operations, I think it's important to provide you with a sense of what are the key performance indicators for the project moving forward in the life of mine. On a yearly average basis life of mine, we believe that Cerro Corona will have a significant contribution of around 350,000 equivalent ounces per year to the group.

On a cash cost basis, we believe that our cash costs should be around $330 per equivalent ounce, with a sustaining capital figure of around $50 per equivalent ounce. That leads us to an all-in cost, basically the metric to which Nick was referring at the beginning of the call, of around $400 per equivalent ounce. The project total capital to completion is estimated to be around $450 million.

And again, all of this I think just a first footprint for Gold Fields in South America as a region. Cerro Corona is located in a region which is very interesting for future growth for us. We're only 40 km away from Yanacocha, which is one of the largest gold production mines in the world right now. And we believe that we have great prospects in Peru and South America moving forward. So, the fact that Cerro Corona is about to start production is a very important milestone within the strategy that the Company has set for future growth.

Cerro Corona will deliver. We're very close to it. And we have all the operations team in place. And we feel very confident that we will drive it successfully into production very shortly. Thank you.

I'll hand it out to Nick now.

Thank you, Juancho. I'm just going to sum up by giving you some sort of view on our outlook. First of all, looking at the quarter we're in up to the end of June, as you heard us say, safety effort's going to be stepped up. Really, if we can't mind safety in certain areas, then we have to ask ourselves why we're mining. And that's certainly what we're going to be doing.

South African production with the stability of the power situation and assuming that continues, which I think it will, should be up at least 4% for the quarter. International production will be steady. And our group costs, we think we'll hold them more or less where they are, round about the $500 range.

Looking further beyond, though, in quarter one fiscal '09, which kicks off on the 1st of July, as you've heard, South Deep, we should recommence our development below 95 level as we repair the damage to that ventilation hole we spoke about. Cerro Corona starts production, as you heard Juancho indicate. And the Tarkwa CIL plant, that commences commissioning and production. St. Ives will also be bringing in some higher-grade underground operations.

I think the important thing is if you add up all of these issues together in terms of the impact on Gold Fields, what it means is we take Gold Fields from a period of very heavy capital inward investment where we really haven't generated much cash because we've been generating these projects, constructing these projects. And now with the Cerro Corona project being completed and the Tarkwa project being completed at roughly the same sort of timeframe in the same quarter, that's going to place the group in a much better situation because the capital we were spending on those projects now ceases. And that's very sizable.

Cerro Corona, we've been spending around about $70 million or $80 million a quarter. And the Tarkwa plant expansion, we've been spending about $40 million a quarter. So substitute that with additional production instead, which is around 350,000 ounces a year from Corona and then also extra 80,000 to 100,000 a year at Tarkwa, straight away, you can see the big swing that we're going to have in the second half.

And also, as you heard, Corona is coming in at about $330 cash costs. Our overall cash costs are about $513. So that will bring down the overall cash cost. But more importantly, it will also bring down our total all-in costs. The all-in costs have grown also lower as well. So all around, this puts the group in a much better position going forward.

Our strategy is not going to be fundamentally different from Ian Cockerill because most of the team who are here were actually integral to the formation of that strategy. The one slight nuance at this stage is that we are going to be focused heavily on the concept of all-in cost or notional cash expenditure, in other words managing the total cost of the operation, cash costs and standing capital, which in turn drives the free cash flow and the margin, the overall margin. That's going to be one of the key issues we're going to be focusing on. So it's not just about ounces. It's about making money. And obviously, you need ounces to make money. But it's the right ounces.

Safety is going to be absolutely key in this quarter. And so if we can get our safety right this quarter and the quarters that follow and deliver on our projects and stabilize the production in South African following the stabilization of power, then this group will be in a very good position to generate good cash flow and earnings for shareholders. Thank you.

With that, we'll hand it over to questions.

Thank you very much, sir. (OPERATOR INSTRUCTIONS)

Our first question comes from Victor Flores of the HSBC. Please go ahead, sir.

Yes, thank you. Good afternoon, Nick and team. I have three questions this morning. First of all with respect to Beatrix, if you look historically at the grade that you mined at Beatrix and the reserve grade, they've tracked pretty well. In the past couple of years, you've seen this big divergence open up between the recovered grade and the reserve grade. Now you're saying that it sounds like there's a problem between what you're blasting and what you're delivering to the mill. But how do you know that there isn't actually a reserve calculation problem?

For that, we'll get Vishnu to answer that question. Hold on, please, Victor.

Thank you.

Hello, Victor. Good afternoon. It's Vishnu. Sorry. I'm just reaching for my glasses. Victor, the result calculations have been audited. So we're quite happy that we're not making any fundamental errors. Besides, the system that we have in operation is one that we have been using consistently for a number of years.

However, what I'd like to point out to you that in the reconciliations that have been done, the volumes have been lower than planned. And that's accounted for 60% of the gold. The grade and mining mix accounted for 4%, and the mined gold factor for another 36%. So essentially, if you put that together, the two fundamental issues that are affecting Beatrix right now is volume and grade.

And I think we've done an assessment of what's happening underground. We realize that over the past few months, there's been a diminishing shortfall percentage that's been recorded. And I have confirmation that there's significant lock up underground. The current management team in place is focusing on addressing this. So I expect to see some changes over the next few months.

Great. Thanks. My second question goes to the slower-than-expected ramp up in the production of primarily Kloof and Drief during the final quarter of the year. And the one thing that I see constant in your commentary is that there seems to be some excess caution with respect to pillar mining. Does this imply that going forward we should expect less material coming from pillar mining, which tends to be the higher-grade stuff?

Hello, Victor. It's Terence. We are showing a slower-than-normal build up. I think primarily, it's one of going back into workings that have been standing for over two months. That's the first issue. So we've had to go back in and make site.

The other constraint that we do have is labor. We have over this period replaced many of the contractors on the mines. That was as a result of terminations of those services and the fact that we believe we can do a lot of that work better. So we are a little short of labor. We were expecting to move some labor across from South Deep. But that hasn't eventuated as yet. And we're still in discussions with organized labor around that.

The other aspect that you quite rightly point out is that we will exercise caution in terms of the approaches into pillars. Bear in mind that, for instance, one of the shafts that we have, we have stopped with three shaft at Kloof, which is ostensibly a scattered pillar mining area, albeit at high grade. In some of those areas, it just hasn't made since to go back into them at this point in time. And we are reassessing those pillars especially.

The other areas at six and seven shaft at Driefontein, six is ready to go. And we've changed the way that logistics flow at seven shaft. And that has taken some measure of reorganization and restructuring to in fact build up to previous levels of performance. But again, we are going to look at these pillars.

Great. Thank you. And if I could just ask one final question, and that has to do with Cerro Corona. You've pointed out in the press release that you have some significant stockpiles of both oxide material and mix material, which have an average grade that's better than the overall deposit. But are you actually going to get the recoveries out of that material? And do you have sufficient stockpiles of sulfide material ready to feed into the plant?

Hi, Victor. This is Juancho. Yes, I mentioned that we're ready to start up from an operational standpoint. And we have already enough stockpile to feed the plant. So that's been taken care of. We've been mining the pit to feed all the construction of the tailings. And at the same time, we have been building the stockpiles of sulfides enough to start feeding the mills so that we're ready.

Great. And then just a follow up -- is the material that you plan to feed through the plant for, say, the first year or so going to be materially higher in grade than the average of the overall deposit?

Yes, indeed, we expect in the first I would say year or probably a little bit more to get the higher-grade ore for the plant.

This material is closer to, say, 1.3 g or 1.4 g rather than 1 g.

I would say that it's in the ballpark of 1 g per ton.

Victor, it's Terence. I think the other thing is that we probably are going to have a little bit more mix materials going through the process first up. And that ultimately will also impact on some of the recoveries that we do have. Once we get into the sulfides proper, obviously, that will normalize.

If you look at our reserve statements, we do indicate that we have a low-end recovery, which will obviously affect the mix materials. And then we get up to high-end recoveries as the plant gets going and we get into the fissure rock.

Okay. Great. Thank you very much.

Thank you.

Our next question comes from Alex Rackwitz of Nevsky Capital. Please go ahead.

Hi. Good afternoon. I submitted a question this morning, the presentation, but unfortunately, I had to run. So apologies for the repeat question. And the question was how come you're showing in the presentation that you've got pretty low power supply use at the African operations, where AngloGold has 96.5% across their mines. You're saying at Driefontein mine you've had 90% to 95%. At Beatrix, you've got 90%. South Deep, I guess it's a different issue. And Kloof, you've got -- I think you said slightly lower as well. Can you just go into that and maybe explain whether you expect to get more power soon and maybe, which would eventuate a recovery of those mines?

Hi, Alex. Terence again. Yes, I did answer this question at the quarter year. I'm not going to talk on behalf of AngloGold. I'll give you what actually happened to us. In essence, we were told we had 90% of our historical average for the time being. Once the -- post the 7th of March -- once the announcements were made and post representations to the various government stakeholders as well as Eskom, there was a decision made that an additional 260 MW would go back to the mining industry. And that was based upon representations made to, obviously, the regulators and Eskom.

Our proportion of that was 26 MW. So we had represented, we had put forward that in fact we needed an additional 5-odd percent at each of Kloof and Driefontein whilst we could continue with around about 90% at each of Beatrix and South Deep. So that in essence was what we asked for at the time. And we were given that on the basis that we didn't affect any jobs.

AngloGold, again, I can't answer for them. But they must've asked for something different.

Okay. Just a follow up -- the way I understand it, you're using about 600 MW in your South African operations, which came down to 540 MW when they imposed the limits. Now you're getting another 26 MW, which means you're back to 566 MW, which suggests you're actually pretty close to 95%.

Yes.

Does it seem to be based on still 90% for some of the mines? Is there a discrepancy? Or are you using electricity for something else?

I think just remember that these are averages. And we're not using power for anything else. If you look at what we actually consumed in the quarter, you can see that it's quite a bit lower than even the 90% at some of the operations. Again, we will build up in terms of practicality. As we build up and move back into six, seven, eight, and three shafts to the extent that we've spoken about, we probably will get closer to 95% overall and utilize those capacities.

We also control this on a group basis right now. So from a central perspective, we are allocated the number sort of that you speak about, which is some 560-odd MW. And we redistribute that based upon certain needs. And we were entitled to do that on a group basis.

Okay. Thanks.

Our next question comes from David Haughton of BMO Capital Markets. Please go ahead, sir.

Good afternoon, Nick. Following up on that inquiry on Cerro Corona, great reconciliation, how's the copper going? It appears as though it's somewhat higher than the reserve base.

Can you repeat the question again, please?

Yes, just returning to the question that Victor had on Cerro Corona, quite a bit of that discussion was with regard to reconciliation of the gold. But also, the copper appeared to be higher than what the reserve base was. Is that something you expect in the early phases of production?

Yes, basically, again, the way we're going to be feeding the plant is we will be starting with a mixed-ore material. And then we'll be moving into the supergene and hypogene. The mixed ore and plasma combination within supergene will deliver that. So again, we're very in line with what we had in our reserve books in terms of reconciliation. We shouldn't expect any significant variation.

All right. And when would you expect to go commercial on Cerro Corona, in other words just running through the P&L rather than being capitalized?

That should be achieved by the second quarter of financial '09.

Okay. And still looking at offshore assets, in the case of Tarkwa, can you give us a feeling as to what the ramp up could be for the expansion of the CIL?

David?

-- could we expect to see?

Glenn here. Yes, basically, we expect to be at full production, which is 1 million tons a month through that plant by around about Christmastime, maybe slightly into January, just depending on how the Christmastime period goes. And that's going to take us -- I think we've got, hopefully, some high grade coming into the year as well. So that's going to take us up to around about 180,000-odd ounces from Q3 and Q4 of 2009.

Okay. And do you have a feeling for the impact on the unit cost there? Will you see some improvement with the grade?

Yes, we do expect to see an improvement. And the reason is that the [heat bleaches] basically give you about a 70-odd percent recovery, whereas the plant is upgrading it at over 90%. So, we expected to see a bit of an improvement. I don't think it would be very much based on the change in the electricity prices we've just seen. So, I think in your models you probably want to keep it fairly flat at this point in time. Some of the improvements we expected have been wiped out in the last six months through forces beyond our control.

Okay. Because a weighted average number of about $20 per ton seems to be working at the moment, at least the way I'm calculating it.

That sounds pretty good to me, too.

Okay. Very good. And in the case of Driefontein, can you give us a view as to what we should be expecting in the next financial year by way of throughput and also ounces produced?

Driefontein going forward for the last quarter of this financial year is 6.8. That's the guidance that we've given to the market. And into the next financial year, it should be between 6.8 and 7.

Let me just give you overall perspective. Basically, subject to the overall review that we spoke about earlier in terms of the safety requirements, Driefontein should be a 7-ton-a-quarter mine (inaudible) ton-a-quarter mine, Beatrix hopefully up to 4-ton-a-quarter mine. And what you're talking about at South Deep for the moment is probably 1.5-tons-a-quarter mine.

That's what you can expect for fiscal '09. That's what we're shooting for in South Africa. So that assumes obviously stable power. And that assumes that we can manage all of the issues around pillars. And in fact, the 6 tons a quarter you're seeing for Kloof already presupposes falling out of a lot of the high risk (inaudible) [areas] already.

Okay. Thank you for that. And in the case of Driefontein, the mix between surface and underground, would that remain about where we were in the March quarter because it seemed a very high proportion of open pit material or surface material I should say.

That's correct. What actually happened in the third quarter of this financial year is with the cutback in power and our ramping down of production at two of our shafts, we've dedicated two metallurgical plants to surface material and one, which is our principle plant, to underground material. So you will see that there's a significant increase in the milling of surface mineralized rock.

Okay. And the curtailment or mothballing of nine shaft plans, is that just something that's on ice for now to be revisited sometime in the future?

If we get power in the future, bearing in mind this would require around 110 MW of power. And if the local gold prices hold up or improve substantially, that's something that we'll consider into the future. But for now, I think given the situation in the country on power, I don't think this is something we're going to resuscitate in the short term. But what we are doing is we're keeping it on care and maintenance. We're keeping the integrity of the infrastructure on the mine so that we can bring this back into production again pretty quickly. That's the objective.

Okay. So that would also mean pushing potentially that out in the future if it was turned on again. But in the near time, are you saving any of your capital outlay?

Big saving in capital because bear in mind this was a project that was going to consume about $500 million to $600 million over the next eight years or so. So at the moment, that's not going to happen. But it's also a very important reserve base, 8 million ounces, which we do classify below infrastructure. But nevertheless, there's an option value attributed to that, which we could certainly bring to [cap] in the future.

Okay. Would you consider that part of your reserve base for the end of this fiscal year? Or would you just continue to consider it below infrastructure and not use it as part of a depreciable base or anything?

Well, we'll treat it the same way we have in the past.

All right.

And we're approaching an hour now. And could we have only one last question? Thank you.

Yes, of course, sir. Our final question comes from [David Leffel] of Deutsche Bank. Please go ahead.

Yes, thanks. Thanks. Nick, maybe Terence, just want to try to revisit this pillar issue and I guess the guidance around Driefontein. When I look at your slide 33 in your packet you put out today, you showed in February guidance around 6,800 kg. And today, you reaffirmed that guidance around 6,800 kg for the upcoming quarter. And then you talk about pillar mining and probably Drief is at least 20% of your production. What is actually going to occur in the review of the pillar mining? And does this 6,800 kg that you're guiding us to this quarter include some pillar mining or exclude some pillar mining?

The 6,800 kg does include some pillar mining. However, I should stress that at this point in time, the ten shaft complex at Driefontein has been held in suspension for a two-week period until we reevaluate our strategy going forward. But there are pillars on the other shafts that we are actually mining at this point in time.

It's still early to tell what the outcome is going to be from the exercise that we are currently busy with, with respect to pillars at Driefontein and at Kloof. I think that we will be able to disclose in June once the work's completed.

So am I correct in assuming that the 6,800-kg guidance includes your planned pillar mining with the exception of the number ten shaft while it's closed?

Yes.

And then I guess can then we look at the Kloof, the drop off in production and the guidance in Kloof? What is driving that then as I would assume that was the pillar mining?

That was indeed the pillar mining at three and eight shaft.

Which has been decided not to mine at all going forward?

Three shaft currently is at 50% of its production. And eight shaft is currently at -- and I'll give you that number right now. Eight shaft is at 20% of its production level.

Okay. And is that guidance then that you've given us that they maintain that? Or is it the intention that they go to zero? I mean, how do we get the big drop from this period to in the guidance?

The guidance going forward is that Kloof will be a 6-ton-per-quarter operation. We'll maintain the current levels of production at three and eight shaft.

I think the other key determinant here is seven shaft at Kloof. And that's where we hit quite hard, is we were upright in there at values almost double what we're currently getting. So we were well above plan for a very [projected] period of time. And those grades in fact have now come off. And it's moved to disappointingly lower levels. But unfortunately, that is the grades that we plan to exploit at that seven shaft. That's been a big impact for us.

David, I think you should just -- we should leave you with a very clear message that we are reevaluating all areas of our mines in South Africa in terms of the safety because we're very committed to making sure that we don't have the kind of round of fatals that we've just had. We just cannot do that. And everything is under review at this stage. What the guys are giving you is what we've not got at the moment. But we are going to be conducting detailed reviews across all of these mines to see if we need to reconfigure them in any way as a consequence of our safety strategy.

So the guys are giving you today their best estimates going forward. And to repeat, Kloof already has a substantial part of those pillars and remnant mining taken out.

Okay. Thank you, Nick.

Okay. Thanks very much.

It's a pleasure, sir. Would you like to make any closing comments?

Very briefly, just to say that this has been a very tough quarter for us with the power issues. And the issues that transpired after the quarter have also been very difficult for us. But we're working through all these issues. And we believe we can find solutions and leave Gold Fields in a situation where we can both mine profitably and safely going forward and deliver our new projects. And that will be the main mission of this management team. Thank you very much, folks.

On behalf of Gold Fields, that concludes this afternoon's conference. Thank you for joining us. You may now disconnect your lines.