Gold Fields Ltd (GFI) 2008 Q4 法說會逐字稿

Good afternoon and welcome to the Gold Fields Fourth Quarter Results. All participants are now in listen only mode and there will be an opportunity for you to ask question sat the end of this afternoon's presentation.

(OPERATOR INSTRUCTIONS)

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

Dylan, thank you very much. Good afternoon, ladies and gentlemen, and thank you very much for joining us for this conference call on the quarter four and fiscal 2008 results for Gold Fields Limited.

The format of the call will be that our Chief Executive Officer, Mr. Nick Holland, will do an introduction. After that, he will hand over to Terence Goodlace, our Chief Operating Officer, who will do a brief operational review and then Nick will wrap up again, after which we will take some questions. I'll hand over to Nick Holland.

Thank you, Willie, and good afternoon, everybody. Looking at the last quarter, first of all, let me give you some salient features of how the quarter ended 30 June transpired for the Company.

Our production recovered from 827,000 ounces in quarter three to 865,000 ounces in quarter four and that was mainly on the back of an improvement of the South African operations given the power crisis we had in the previous quarter. The international operations were reasonably flat.

The gold price went from $921 an ounce to $895 an ounce. And as a consequence of that, our operating profit went from $347 million to $354 million, slightly up on the previous quarter. Operating costs continue to be well controlled, going up from $468 million in the March quarter to $484 million in the June quarter.

Cash costs at $502 an ounce were lower than the previous quarter, which was $513 per ounce. And we're pleased with that result given the continued inflationary pressures we're experiencing on our costs.

Notional cash expenditure per ounce, which is measured as operating costs, plus capital expenditure, all capital expenditure that is, went from $843 an ounce to $869 an ounce. And why this measure is important for us is that I've decided that we should be measuring ourselves on all-in costs of production because that, at the end of the day, is what drives cash flow.

Now, the $869 an ounce is particularly high because we're in a heavy [Inwood] investment mode at the moment. And during this last quarter alone we spent $88 million on the Cerro Corona expansion. And if you take that off, that's about $100 per ounce and you would reduce that NCE from $869 an ounce down to about $769 per ounce.

So we have been heavily investing over the past year in our Inwood projects for growth, in Cerro Corona, in Tarkwa, also in some new mines in Australia that will be coming into production. And all-in, we've spent about $440 million over the last year on growth projects and a further $200 million on acquiring further strategic investments, principally Sino Gold.

If we look, then, further down the income statement, we can see that earnings for the quarter declined from $166 million to $104 million. And the reason for that decrease is that last quarter we got an exceptional gain of $38 million, which was the release of mark-to-market losses previously accounted for when we fixed the number of shares that would be given to Mvela Gold on their conversion to 50 million shares. We didn't have to repeat it at this quarter so the earnings are distorted by that.

If you look at core earnings, or what we call net earnings excluding gains and losses on foreign exchange, et cetera, then our earnings declined from $138 million to $119 million. And that's more representative of what happened in the quarter.

If we look further down on our strategy that we are focusing on, this is my first 90 days that I've been Chief Executive of Gold Fields. And I said previously that there were two main areas that I'd be focusing on in the short term. One is to improve the safety record throughout the group. And two would be to deliver our projects.

If I can first of all deal with the projects delivery and then I'll come back to safety very briefly. First of all, Cerro Corona I'm pleased to say that we have rock in the mills at the moment. The mills are turning. And that operation will produce its first concentrate by about the 12th of August and we should have the first shipment of concentrates in quarter one of this year, probably early September. So that project is finally coming to fruition and I expect it to ramp up to full production of 375,000 ounces by the end of the year.

The Tarkwa expansion is expected to be completely around about October and that should add about 80,000 ounces a year, again by the end of this calendar year. St. Ives, we're in the process of bringing two new underground mines into production. That's Cave Rocks and Bellaisle. And I expect by the December quarter that that operation should increase its production by about 15% as those new mines come in.

In South Africa I think it's pleasing to note that the power supply situation has been stable since the power outage we had at the end of January. And I was fortunate enough to be able to speak to the chief executive of the national utility there, that's [ESCON], and asked him what his views were two nights ago. And he indicated to me that he felt the power supply would continue to be stable but tight. And tight because we're in the winter months in South Africa.

But he felt they had a much better handle on their maintenance issues, they'd caught up some of the backlog, and that their coal supplies were more regular. So I think we're over the worst in terms of power, but energy conservation is now a permanent feature in South Africa and we'll all have to do our bit.

The safety audit has been commenced around the South African operations and we have an external outfit that will give us feedback in October. (inaudible) mining has already been reduced substantially across the operations because we did classify this as high risk compared to virgin rock mining and we've taken out something like 24% of Driefontein and about 50% of Kloof.

South Deep continues to be restructured and we're pleased to report that by the end of August South Deep will be right-sized and will then be a fully mechanized project. And we're getting this mine now geared up for development and to make this a world-class operation. And we had a strong recovery as well from Beatrix during the last quarter.

So I think we are delivering on our projects. And I certainly believe that our quest for a 4 million ounce profile for Gold Fields again is just around the corner and we should be able to achieve that in early 2009, probably in the first quarter in 2009.

In terms of safety, I said that we had to make a step change in safety and that we would be looking across our operations for high risk (inaudible - background noise). And we're dealing with those. And there's three particular areas we've dealt with.

The secondary support at Driefontein has fell behind and we decided we have to intervene and do something radical to get that up to date. That means that going forward Driefontein will probably lose about 400 kilograms in the next quarter. But that's only a one quarter issue and the worst of the backlog in that particular area of the mine will be caught up by then.

At South Deep, we had to do rehabilitation of the 95 2 West and 3 West ramps. That work should be completed by the end of August. And again, that means that South Deep's production will be about 200 kilograms lower in the September quarter as a consequence, but thereafter will revert back to historical levels of about 500 kilos a month.

The big issue is of course Kloof main shaft area and Terence will talk more about that. But essentially the steelwork on the shaft is in urgent need of replacement. And given it's a 40-year-old shaft, we've got to the point now where we have to significantly curtail production in order for us to repair that.

And it's important for us to do that because this shaft is going to be around for the next 15 years and we need to make sure that we can set this thing up. It's been used for 40 years and you unfortunately cannot catch up all the necessary maintenance just on the Sunday shifts. So that's something that we've had to do and get that in place.

And I think I'll leave you with this particular message before I hand over to Terence. Some time ago when I went on the road after I became chief executive, I said that my short term delivery for Gold Fields was to get Gold Fields back to four million ounces on an annualized basis, in other words, on a run rate basis, by the end of calendar 2008 at an NCE of $725 per ounce, and that's an exchange rate of eight.

And these short term interventions in South Africa, which are safety critical and must be done, do not detract us from that goal. The projects that I've mentioned in terms of growth for the Company are delivering and I fully expect us to achieve this target in quarter three fiscal '09, in other words the March quarter of calendar '09.

And I think that'll go a long way to restoring Gold Fields' results, its cash flow, its earnings and its rating in the market. So none of the issues that we're currently dealing with are going to affect that. And the issues that we will have over the next quarter are urgent safety issues that must be dealt with now.

To give people comfort, we've done a complete review across the operations to see are there other areas around our South African operations that need to be dealt with. And I'm satisfied that the Kloof shaft issue is the only major issue that needs to be dealt with now and that the secondary support and ramp rehabilitation at South Deep is being adequately dealt with.

So at this stage, those are the main areas that we need to fix. We'll fix them and we'll still be on target to achieve our goal of four million ounces early in 2009 at $725 an ounce NCE. Remember that's operating costs plus capital, which at, say, $925 gold price would still give us about a $200 an ounce free cash flow margin before taxes, if we can achieve that. And certainly that would be very good cash flow for the group.

So those objectives remain and I'll hand you now over to Terence to give you a more detailed review on the operations.

Thank you, Nick, and good afternoon or good morning to everybody. If we look at the gold production for the quarter, as Nick said, we've increased by some 5% to 865,000 ounces. And that again was primarily driven by an increase in production, ex South Africa where we had a 6% increase to 553,000 ounces for the quarter.

Driefontein had a good quarter in terms of volumes. It was restored -- it restored its volumes. It had reasonable grade and its quality factors meant that it produced 217,000 ounces.

Kloof also increased volumes. It increased volumes to just under 700,000 tons for the quarter. Values were in line with plan, but marginally down on the previous quarter. And the mine core factor for this mine was consistent with plan. It then produced 179,000 ounces.

Beatrix was, I would say, the start for the quarter with an improvement of some 45% in gold production to 119,000 ounces and that was off the back of a marked improvement in the mine core factor from 67% to 94%.

As far as South Deep is concerned, we pulled back on the volumes at this mine and that was primarily as a result of the tragic accident which occurred there on the 1st of May, the stopping of the VCR stoking panels above 95 level and the intentional stopping of their 95 2 West and 3 West ramps for a three-month re-support program which affected production by some 300 kilograms per month.

Underground values at that mine were still good at 7.5 grams per ton and we had a very positive mine core factor. However, the volume offset resulted in the mine producing 38,000 ounces.

As far as Tarkwa was concerned, we had less milling and processing days in the quarter and that, in conjunction with a release of GRP from the heap leach facilities and increased yields at the CIR, meant overall production of 169,000 ounces for the quarter.

Damang had lower production or volumes through its process to some -- just over 1 million tons for the quarter. Grades were slightly higher on the back of increased volumes ex the Damang cutback. But along with the grade came increased rock hardness and that also affected some of our throughput. And the mine produced 50,000 ounces.

St. Ives decreased margining to 101,000 ounces off the back of decreased volumes and decreased gold, ex the heap leach facilities where rock hardness affected recoveries adversely. Importantly, the new underground mines were commissioned and as they ramp up, the higher proportion of relatively high grade ore will ultimately report to the (inaudible).

Agnew performed very well in terms of volume, value and quality and produced 55,000 ounces and all of this emanating -- well, most of this emanating from excellent volumes and values that were realized at the productive Kim load.

If we move through and look at net operating costs for the quarter in U.S. dollar terms, South Africa was flat at $282 million. The increase in rand terms was attributable to increased volumes, which led to an increase in consumables as well as an increase in safety and production incentives as well as an increase in some contracting services that we used on the mine.

Ghana was 4% up and Australia was 5% up in U.S. dollar terms. the drive in Ghana, the increasing Ghana was as a result of increased prices of commodities such as fuel, reagents and explosives, as well as an increase in the maintenance and repair contract. There was also increased mining in the Damang cutback area, which is mining harder ores. So overall, I think pretty much -- costs were pretty well contained in terms of consumption and price.

Moving over to capital expenditure, the increase in capital expenditure was some R439 million for the quarter and that increased our capital expenditure to $327 million. However, an important point to note with regard to capital expenditure is that in the coming two quarters we will reduce quite markedly to $307 million and $254 million respectively and that's off the back of the investments that we've been making into mainly Tarkwa and Cerro Corona.

So those -- the expenditures at those projects will taper off and there will be no residual expenditure in two quarter's time. At South Deep we'll continue to require an inward investment at some $30 million per quarter.

Moving on to the Cerro Corona project, I think it is exciting that we're now ultimately at advanced stages of commissioning. We do have rock in the mill and the process is flowing. The tailings facility is working and we're getting everything through the flotation circuits. Capital expenditure for this project is some $550 million, which is up from the $450 million that we had reported previously.

I think what's important is the ramp-up at this mine. We're hoping to ramp up to some 100,000 equipment ounces in the coming quarter, in the December quarter, and ultimately over the financial 2009 year we expect an NCE of some $587 per ounce and over the life of mine $356 per ounce.

Looking at South Deep project, it's pleasing to say that the restructuring at that mine which we've reported on previously, is almost complete and we're now in a position to really advance this mine on a modern mechanized basis. We continue with the exploration drilling program into phase one and phase two. We continue with our resource modeling below 95 level. And we are looking at ramping up the development above and below 95 level to access all reserves as well as complete infrastructure.

We're also in a position where we in this quarter have now completed the 2,500 meter extension to the [Brettos wall] in the vent shaft and we shortly will be in a position to commission one of the surface fans at the ventilation shaft located at the (inaudible) area. The ramp-up of the mechanized D stress mining should also occur within the following six months.

Moving on to the CIL plant expansion and Tarkwa, Tarkwa will be characterized as a mine which has two halves. If we look at the coming year, essentially as we tie in the expansion into the existing plants there will be some delays. But ultimately we're looking at taking this mine from 160,000 ounces per quarter on average to just under 200,000 ounces by the end of this financial year.

Logistics has been a challenge in terms of the actual construction of the plant, but ultimately as we ramp up this production we should be able to bring the NCE for the mine down to something like $700 per ounce.

Moving on to St. Ives, as I said a little earlier we have now commissioned the Cave Rocks and Bellaisle projects and we also look to this mine to increase production to something like 115,000 ounces per quarter. This should also go a long way to alleviating some of the cost pressures at that mine and ultimately bring its NCE down to something like $800 per ounce.

And then finally just moving on to Kloof, we are reporting that we are going to have to stop and reequip the bottom section of the main shaft at this mine. This will require work over a six-month period. During that time, we will divert logistics flow people and all flows away from this shaft system and devote ourselves totally to reequipping the bottom steelwork, bottom level steelwork at the shaft.

We're starting with this as soon as possible and we're hoping to complete this by early January. What this means for us is that over the coming two quarters our gold production will be down 30% off current levels. Post that, we hope to resume at or on about the same levels that we've reported in this current quarter. And with that I'd like to hand you back to Nick.

Thanks, Terence. I think just to sum up so that we leave some time for questions, our short term objective, then, is to continue our drive on safety. Safety is the number one priority. And in case people think that that's at odds with profitability or productivity, it isn't, because often you find that the most productive and efficient parts of our operations are those that also have the best safety records. So getting these mines set up properly, getting the infrastructure sorted out is key.

And I guess the heightened safety awareness that has certainly emanated through this company since my appointment has certainly allowed us to pick up some of these issues and make sure that safety is really looked at even more importantly than it was before. And please, don't get the impression that safety was never important. It always has been. Our safety record has improved. I think what we're doing is we're taking this just to a new level.

In terms of our production target, just to reiterate again, we want to get Gold Fields back up to four million ounces. Our projects are starting to deliver and I think that by quarter one of calendar '09 we'll be in a good position to have the annualized production rate of four million ounces in place by then and achieving our notional cash expenditures of around about $725 per ounce. I think if we can achieve that, we can restore Gold Fields back to where it should be.

So I think with that, I'd like to hand over for questions that people may have and I've also got in the room here Vishnu Pillay, head -- Executive Vice President and head of South African operations, Glenn Baldwin, executive vice president and head of international operations, Paul Schmidt is acting Chief Financial Officer as well. So I'm sure between all of us we'll manage to answer these questions. Okay, thank you.

Thank you, sir. (OPERATOR INSTRUCTIONS). Our first question comes from Victor Flores of the HSBC. Please go ahead, sir.

Thanks. Good morning. I have a question first of all regarding Beatrix. It's nice to see that the grades have picked up, the mine call factors improved. But what have you learned as you got the grades back about what has led previously to grades being down and erratic and can you give us some sense that the issue is corrected and grades will be where they're supposed to be going forward?

Hi, Victor. It's Terence.

Hi, Terence.

The situation at the mine is such that we've had a very good cleanup at the mine. We have noticed that there are certainly areas at the mine where we have had accumulations of especially fines and those fines have in actual fact been cleaned up in the current quarter.

We continue to examine ways to look at our fragmentation. We continue to look at more optimum ways to clean because we have seen that we have a large proportion of free gold in our ore and ultimately we see that in our gravity circuits. When that drops off we know that we, in fact, are not sweeping correctly.

We continue to minimize the [contents] of water but ultimately it's all about a focus of getting better where we have accumulations of fines, looking at our gullies, looking at our boxes, looking at our pump areas and our dams where there are accumulation of fines and ultimately getting that back out. I would say that I hope that we in fact have sorted this out for good. But gold mining is what it is and sometimes you do get variability.

Fair enough. But I think what you're telling me is that you've isolated the issue to cleaning and it's not to do with ore reserve calculation issues, it's not to do with mining practice in terms of dilution. It's just making sure that once you've blasted that rock you're cleaning out really well and getting the gold into the plant.

Yes, we've done extensive work with looking at whether in fact we're getting the valuation right or wrong. But I've been in mining for long enough, generally that's not the issue. It's generally a mining thing.

Great. Thanks. Second question goes to the pillar mining that might be lost at both Kloof and Driefontein. I realize right now the priority is on redoing that steelwork. But what can you tell us about what might happen with those pillar areas that previously you indicated might be lost?

If you look at the assessment that we've made as far as pillar mining is concerned, we've examined all of our pillars, we've set protocols in place which examine the specific risks for each pillar, which look at the energy release rates, that look at size [misty], we look at the extraction rates and we look at geological complexity, and we assess those.

And over the last nine months we've progressively moved out of the high risk pillar areas to the extent that we have reduced -- or we have reduced pillar mining by some 24% at Driefontein and 51% at Kloof.

Those reductions are already in our numbers. But in round numbers what it in actual fact means is that we have reduced production from the South African operations as a result of this by some four tons or some 130,000 ounces on an annualized basis. That is already in our numbers. We are continuing to refine the way we look and examine our pillar areas but I would say on an 80/20 basis, most of the reductions are already in our numbers.

Okay, great. Thank you. And then final question goes to South Deep and recently you gave a pretty good sort of breakdown of the ramp-up in production at Cerro Corona and I was wondering if it would be possible to get sort of a similar breakdown as you see South Deep sort of ramping up from current levels.

I think critically as far as South Deep is concerned, our ramp-up, now that we have almost finished with the support of the primary ramp which leads to the 95 2 West and 3 West massive mining areas, we will go back to 100,000 tons per month and producing something like 530 kilograms of gold a month. So that we will continue for something like at least the next year.

We've also provided in our quarterly presentation of today the development ramp-up because that is probably more important than the starting or the massive mining ramp-ups. And then that we look to increasing development above and below the 95 level, the one looking at moving toward ore reserves and the other one examining infrastructure or targeting the building of infrastructure below 95 level.

As far as the ramp-up beyond that, we're in a position -- we'll be in a position sort of early in -- late in August to present to yourselves what ultimately the full ramp-up to full production is going to look like. As we have said all along, we've been conscientious or we've been busy with our geological modeling and our mine design and ultimately we need to go to the board with our profiles and that'll be happening on around about the 20th of August and then we will release that to the market.

Okay, great. Thanks. Thank you very much. I apologize. I haven't looked at the presentation because for some reason this morning the HSBC police wouldn't let me get onto your website. So I'll try to get it later. But thank you.

Okay, Victor.

(OPERATOR INSTRUCTIONS). Our next question comes from [David Leffle] of Deutsche Securities. Please go ahead.

Good afternoon, gentlemen. Just wanted to touch base and ask about Cerro Corona. I think there was a presentation on the website from a few weeks ago when you had your, I guess, visit there. And the CapEx number I think was somewhere near $450 million.

And then my concern is now that today's number is at $550 million CapEx and I haven't even seen you spend that much in the last quarter, how much -- well, what transpired to raise the capital costs and how much capital is still to be booked through in the next six months at Cerro Corona, should we look for?

Terence?

The number that we put into the presentation at the time that we had the visit was the $450 million. We had picked up in the meantime numerous commitments that had been made in terms of this project and those had not yet been approved for release. We've only just brought those to the Board and there were many, many commitments that were made prior to June year-end and a lot of that has been primarily driven by the overrun of the project in terms of timing and there's also been mis-estimation as far as the tailings management facility construction is concerned.

And that has resulted in a full $550 million. We haven't spent $100 million over the last quarter. A lot of this was in the pipeline. They were commitments to accelerate the commissioning of the project and they've just been brought to book now.

David, I think just to add, there's about $500 million that's been brought to account. So there's about another $50 million to spend. And also, since the $450 million there's been other time delays, underestimation of quantities, further claims from certain subcontractors that we've had. So regrettably, they have cost more.

But the good news is most of this is now behind us and I think this is still going to be a great project, particularly at these copper and gold prices. So it's regrettable that the project has ended up costing $550 million instead of the original forecast of $450 million.

Okay. Maybe I can just follow up then with your other capital projects I guess, primarily maybe Tarkwa in the short term. Are we expecting similar sorts of increases in costs? I mean how do we actually model this?

The Tarkwa we said that the CIL expansion and the heap leach expansion would be about $165 million. There's about $35 million to $40 million left to spend in the first quarter of fiscal '09 and the first month of the last quarter. So over the next four months you can model about another $40 million to $45 million over that period and then you're done. And that's pretty much on track. We've got a very good handle on that project and we don't anticipate any major overruns on that particular one other than what we've got now.

The numbers that we've put in to the market previously was that the CIL plant expansion would have the capital spend would be something like $160 million and the extension to the phase five heap leach facility would be some $50 million. And we're going to come in pretty close to those numbers.

Okay. And I guess just to circle back on Cerro Corona, when one looks at capital costs -- or capital projects like this in Gold Fields, I mean what sorts of returns would you now like to see from projects that you might start going forward because clearly this one has shown that the returns are not nearly as robust as what they were 12 or 18 months ago.

I think, David, we have to look at Cerro Corona in this context, is that when we approved this project we approved it with a gold price of $450 per ounce and copper price of $1.75. And you know where the prices are today. So, yes, there's been an escalation in the capital. Some of that's because of time delays. The project is probably about six to nine months late. Some of it is straightforward escalation but I think you've seen on a lot of other projects and some of it, frankly, is some poor project management.

But if you look at this project at current prices, this is a very compelling project nevertheless. But it's cost us more than we would have liked but it's still going to make good money. It's going to return all the capital to us and it's going to generate a good return nevertheless.

Okay. Thank you.

Our next question comes from Paul Durham of the HSBC. Please go ahead.

Thank you very much. Good morning, gentlemen. Just, I saw your interview on TV early on today, Nick, and obviously the -- you mentioned several issues but you also came out with the decentralization of the head office. I just wondered if you could just give us a bit more sort of detail on that in terms of timing, whether there's going to be any cost savings involved by getting rid of the head office. I think it's a great strategy to have people sort of in charge of their own destiny in their geographic areas and clearly you've alluded to that. But maybe you could just give us a bit more skin on the bones if you could.

Sure. So I think first of all I want to create -- or correct any misconception that we're just going to get rid of all the people here. That's not really the issue. The issue is that we want to redeploy people close to the operations. And in particular, if you look at the South African operation, there's about 60 to 70 people here that should really be closer to where the South African operations are. And we're in the process of finding a way to do that and get them out of corporate because they aren't really corporate.

In terms of the rest, what we want to do is make sure that we support the new regions which need to be empowered, not only in terms of running the existing mines but also in terms of growing those regions. So that may also entail some redeployments to the regions of certain people. And we've already started evaluating which people will go. But I think at the end of the day we'll probably end up with still around about 50 people overall in corporate, which would be the executives that remain here, the central consolidation, people to make sure that we comply with our common standards.

But I think the biggest takeaway that you should get from this is two things. One, it is more autonomy to the regions. That's the first thing. And secondly, it's empowering those regions to look for growth. And to give you one example, if you look at South America, it's much easier for people based in South America to look for opportunities to grow the Company than it is for people sitting in Johannesburg. So let's structure them accordingly. Let's make sure that they have the resources to do all of that.

And that way I think we can turn Gold Fields into a truly global company where we have three regions outside of South Africa where I'm targeting 1 million ounces out of each region, out of South America, West Africa and also Australasia. And that's a three to four-year time frame. So it's really a question of taking the corporate people and putting them in the right place so we can improve the service to the operations and also the autonomy.

Okay, great. Thank you very much.

Our next question comes from Shane Hunter of BJM. Please go ahead.

Good afternoon, gentlemen. I've just got a couple of questions and it's all around the same topic and it's to do with the opportunities of uranium, which you've highlighted here in the slide and just really coming to understand a bit what's happening here.

What is the difference between the Driefontein dumps or tailings dumps and also the [whist] the historical tailings dumps? Are they sort of -- are they actually sitting in different areas? Are they (inaudible)? So if you could just explain what's happening there?

Sure. What it's about, Shane, is that first of all we've got what we call the tailings. That's existing tailings that are on surface and that's around 400 million tons containing about 28 million pounds of uranium. That's the first part of it. And the second is what we call current arising. So in other words, stuff that's really going to come from underground. And we're looking to reengineer the backend of the plant to deal with that and that's about 20 million pounds that we'll have there.

So there's two real strategies here. First of all is how we bring to account the existing tailings. And there's a number of ways of doing that. It's potentially joint venturing them with other partners, it's developing them ourselves, it could be disposing of those interests. But I think the important takeaway you should get here is that we've spent about a year doing technical analysis as to what we have there and we expect to have a pre-feasibility study completed within the next six months.

But alongside that, we're now looking at the commercial options for us to bring that to account. And also I expect to have an answer to the market with a route to go in the next six months because I do think uranium has got pretty good potential in terms of the market. And we can have a fairly low breakeven price given the fact that a lot of the stuff we've already mined and it's on surface. And I almost look at this as the next mine for Gold Fields. It also has 2 million ounces of gold in it. But the benefit is that it's already been mined and it's on surface.

So watch this space and I'm sure within six months we'll be able to give you a more detailed strategy as to how we're going to commercialize this.

Okay. Just to confirm on the Driefontein numbers, so that's all material which is in the ground that has to come out, which is obviously coming out through the normal processing of gold. Is that right?

Yes. Shane, it splits between -- if we talk about the 20 million pounds from current horizons today, we've worked that between Driefontein and South Deep. So it's a combination of those two mines.

Okay, that's material that still has to be mind, then?

It still has to be mined. If we look at what's in the tailings facility, that's split between Driefontein, Kloof and South Deep. So it looks at the existing tailings facilities and we've worked out our numbers according to that.

Okay, so that's the 28 million pounds.

Correct. And the 2 million ounces of gold that's actually in there.

Yes, okay.

Because we've got grades of around about 0.3 grams per ton and if you see about a 51% recovery, you'd be in a position to in actual fact make money with this.

Okay. And there's no mention there in those numbers of the material in the free state there from the (inaudible).

No.

Is anything happening with that?

No. What we've done is some resource modeling. But we don't at this stage we haven't looked at the critical mass that that provides to us. It is always an opportunity but it is relatively lower grade. But it's always going to be an opportunity.

Okay, great. Thank you.

Our next question comes from Barry Cooper of CIBC. Please go ahead, sir.

Good day, everyone. Just wondering on Cerro Corona in your presentation you're looking at the first year basically spending one-third of the sustaining capital for the entire life of the mine. And I'm wondering what's in that first year and indeed shouldn't that really be part of not just the startup CapEx that is flown into the first year of operation?

Hi, Barry. It's Terence. You're precisely right there. We have the $30 million flow-over in the first year. The other primary expenditure that we have in the first year is the construction of one of the other tailings management facilities called [Las Aguilas], so there's two there.

And we are actually going to spend around about $40 million in this coming year at that facility. It's a total -- it requires total expenditure of $70 million, $30 million will be carried over into financial 2010. But primarily, if you look at that $113 million, $50 million is part of the carryover.

So is -- when you -- because it's identified here as sustaining CapEx, is that $50 million carryover included in the $550 million that you revised for the new CapEx as kind of startup capital?

I think it's just an allocation. We didn't have too many lines left --

Fair enough.

-- and it probably should have reflected as growth.

Okay. Fair enough, then. That clarifies that. And then I sort of got mixed views on your reporting of NCE here. On the one hand I'd say it's a noble way to show things. However, at the same time it does leave things very much open to manipulation in the sense you can understand a situation, all you have to do in order to meet a number is stop doing CapEx, and that's not necessarily a good thing.

And I'm just wondering hopefully there's not an intent to totally not give us the underlying cash component as well as the capital component going forward, as long as you give us those two I'm happy, but if you were to stop giving us the cash component I think that would be perhaps too noble of you to be comparable with other peers.

Okay, Barry, I think you've completely misunderstood with respects what we're trying to achieve here. We've got no intention at all of removing cash costs and you can, in fact, see in the report the cash costs are there. So they haven't been removed and they won't be removed.

Our concern is that the industry over the last number of years, and I'm sure you've seen this yourself, has actually shown very good cash costs in many cases, but they haven't actually generated any cash because you often find that the capital expenditure, by the time you've looked at everything that's been put into capital, that in fact there is no cash flow. And the accounting rules have been changed so many times to allow for so much to be capitalized that, in fact, a lot of the ongoing development, for example, ends up in capital. And we've seen that when we've done our own comparisons.

And what we're trying to do is get more transparency, not less, into the reporting so that people can actually see what is the true all-in cost of production. And also people have tried to say, well, some of it should be sustaining, only show sustaining in there. But all of your capital at the end of the day is being spent to maintain your operations in the medium to longer term. So what we're striving for is greater transparency, not less. And I would challenge the other producers to give the same information in a way that's understandable.

And that's why you'll see in the presentation I've in fact asked one of the analysts at JPMorgan to assist us in doing comparable NCE per ounce for the industry and you'll see it in the presentation. Because at the end of the day, all-in costs determine whether you make any cash flow or not, not cash costs. So I believe that we're giving more information , not less. And you can cut capital short to make it look great, but I think we all know you're just going to cut your own throat.

I think it comes down to greater efficiency in terms of your total spend, whether that's in operating costs or cash costs or capital spend. That's the game that needs to be played here because that will determine whether you make money in the long term.

I agree with most of that. I just think it's going to be a difficult thing to separate. And indeed, even when I go about trying to generate a graph for free cash flow, when the -- someone buys a truck that improves his efficiency but doesn't improve production necessarily, is that sustaining or is that a growth capital figure? And it can be down to splitting hairs on some of them.

If we look at your then fiscal '09 target of NCE $725, what is the capital component in that number?

Well, again, if you look at our presentation, we show you in our presentation on page 14 there's a capital slide. And then what we also do is on page 15 of our presentation we also show you an all-in NCE per ounce. And if you look on page 13 of our presentation you can see the cash costs.

So, Barry, it's all there. Have a look at the presentation. It's on the website and if you have any issues, feel free to call me. But we've given a lot of information here and it's all available. So what I'd suggest you do is look at that and then come back to us.

But again, coming back to your earlier point about people trying to split maintenance capital with growth capital, again, that split, to my mind, is also flawed because I can argue that something is growth, somebody else can argue it's maintenance. It's all capital expenditure at the end of the day to maintain your operations. So I think you should lump it all together and that will determine whether you make cash flow. So --

What --

-- be happy to have a further debate with you offline.

Right. Okay. Just one final, how would you treat acquisition costs, then?

Acquisition of what?

Acquisition of new assets.

Well, that's not capital expenditure. That's an investment.

Okay. Well, maybe we'll have an offline discussion then.

Yes. No, what we're talking about here is capital expenditure. That's capital we spend on projects or existing operations, plus operating costs. That's what we're classifying as NCE. It's actually quite simple and all of the information is there.

Thanks.

Right.

Our next question comes from Chetan Jindal of Altrinsic. Please go ahead.

Hi. Thanks for taking the question. I was wondering if you could give us your thoughts on how the production profile might grow beyond '09, '10, '11, so maybe over the next three to five years as your new projects kick in?

Well, certainly we just have the first sort of run of the reserves and resources which we'll present to the market around the end of August. And I think you can work on the assumption that South Africa will be two to 2.3 million ounces a year going forward. That'll be a fairly sustainable long term profile. Tarkwa in Ghana will be about 750,000 ounces a year. Damang will be about 200,000 ounces a year.

St. Ives in Australia you can work on about 460,000 ounces a year. Agnew in Australia are about 230,000 ounces a year. And Cerro Corona in Peru steady state production about 375,000 a year of gold equivalent. And that's how we see the portfolio for the next sort of five years or so. You can -- you can aggregate all of those numbers, I'm sure.

Shall we take the next question?

Our next question is a follow-up from David Leffle of Deutsche Securities. Please go ahead.

Yes, sorry, guys. Just wanted to follow up. You talked very specifically, Nick, about the four regions. I was just wondering the status of the Denver operations. Will those people be repositioned? Will that office be closed or has that been closed already?

No, Denver is an exploration office. No, the regions I'm talking about are the operational regions. And those are where the mines are. But I'm also going to be charging those executives, as I said earlier, for growth. But the exploration side of the business is distinct from those regions and often targets exploration in other parts of the world. So I don't envisage changing the exploration structure.

There are offices in Perth, there are office in Denver, we'll keep those. There's an office in (inaudible). There's an office in Santiago, for example. And they will continue because they are small structures anyway. There are few people, the overheads are reasonably low. And they can be in those particular areas to assist them to get into the deal flow. But I'm talking about the core operational regions and where the executives are that manage and control those regions. Those are distinct from the exploration.

Okay, thanks.

Our next question comes from [Murray Pullet] of [Pullet & Company]. Please go ahead.

Hi, guys. On a completely different note, could you be kind enough to tell us how preparations are getting on for the World Cup in 2010?

Well, there you are. Well, the stadiums are being built. I fly over them occasionally. And we know that the main train line from the airport is being advanced better at enormous rates. And the primary airport is a bit of a mess at the moment while they're doing all the construction work.

Terence Goodlace And we have enough power at this stage.

Murray, it's being run by the International Futbol Federation, not by South Africa. So I think that they are pretty tough and they'll make absolutely sure that they're 100% happy with everything. But we're optimistic that this will happen and that [Sifa] together with the South African government will cooperate to make sure this happens.

Great. Your country gets a lot of bad press these days and the Olympics -- excuse me, the futbol is probably a very positive step for South Africa and your company in the abstract.

Absolutely. And I'm sure it's going to be a great success.

Thank you.

We've got time for one more question, ladies and gentlemen.

Thank you, sir. Our final question is also a follow-up. It comes from Chetan Jindal of Altrinsic again.

Hi. Thanks for taking the follow-up. I just wanted to dig a little deeper on the previous question. Could you help us quantify maybe what peak production might be given the existing set of assets that you're putting into place? I know it's hard, really, to put a number on it but how do we think about it?

Okay, as I said -- let me go through it again with you, the portfolio. As we see steady state production, two to 2.3 million ounces for South Africa. That's the range going forward; 750,000 ounces for Tarkwa in Ghana; 200,000 ounces for Damang in Ghana; 650,000 ounces for Australia made up of about 460,000 ounces for St. Ives and about 180,000, 190,000 ounces, maybe even 200,000 ounces for Agnew is probably the best number to work on; and then Corona, as I said, about 375,000 ounces.

And I stress that's the existing portfolio only and doesn't presuppose any further brownfield development, any acquisitions, et cetera. And obviously we're working hard to try and add to the portfolio. So if you could aggregate all of those up, I'm sure you can get to a steady state number for the group.

Chetan, if you want to contact me, it's Willie Jacobsz here, I can spend a bit of time with you on getting the modeling right and so forth.

I'll do that. Thank you very much.

Gentlemen, we have no further questions. Would you like to make some closing comments?

Thank you. First of all, just again to reiterate that the safety interventions that I've put in place over the last 90 days will mean that we'll take a short term hit on some of the South African operations. But I stress it's only one quarter for Driefontein and South Deep and it's two quarters for Kloof. After that we should be in good shape on the [SA ops] to get back to where we were.

Secondly, that the international projects are starting to deliver and we expect them to come into production on schedule and to deliver what they're slated to deliver. And I think if we put all those together, Gold Fields is going to be in much better shape by first quarter of '09 and that's our short term target for the Company.

So thanks once again, ladies and gentlemen, for joining us and we look forward to talking to you again in the future.

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